The euro traded near a two-week low against the dollar on speculation some European nations and banks will struggle to raise funds amid the region’s debt crisis. The euro also fell to a series of fresh all-time lows against the Swiss franc, with the Swiss currency, along with the U.S. dollar and Japanese yen, benefiting from their roles as perceived safe harbors in times of trouble.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend |  |
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| Resistance | 1.3280 | 1.5675 | 84.65 | 0.9735 | 1.0070 | 0.8575 |
| 1.3235 | 1.5615 | 84.25 | 0.9685 | 1.0035 | 0.8535 | |
| 1.3200 | 1.5585 | 84.00 | 0.9650 | 0.9995 | 0.8500 | |
| Support | 1.3135 | 1.5505 | 83.35 | 0.9600 | 0.9925 | 0.8440 |
| 1.3100 | 1.5470 | 83.00 | 0.9570 | 0.9890 | 0.8400 | |
| 1.3050 | 1.5440 | 82.70 | 0.9520 | 0.9860 | 0.8365 |
Economic News
USD – Dollar Gains on Renewed Euro Zone Concerns
The U.S. Dollar continued to strengthen against the EUR on Monday, as investors remain fearful that more euro zone nations will finally acknowledge the difficulties they’re having working within their fiscal budgets. By yesterday’s close, the USD rose against the EUR, pushing the oft- traded currency pair to near the 1.31 level.
Irish debt was downgraded, and though markets expected such a move by Moody’s, it nonetheless continues to put pressure on the Euro, which some analysts predict has quite a bit more room to fall.
In addition, traders have recently started to focus more on fundamentals such as economic growth and short-term interest rates. That shift, just getting underway, could take the shine off the soaring USD in the coming months. A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation’s record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.
As far as the North-Western Hemisphere is concerned today, the United States is not due to release much data of concern. Canada, on the other hand, is going to release vital data regarding its retail sales levels, which last week caused a stir among the USD and EUR. Growth in Canadian sales may help return the Loonie back to a bullish posture, but forecasts appear modest at best. This Thursday’s US Core Durable Goods Orders and New Home Sales report appear to be this week’s primary events for dollar traders leading into the Christmas holiday.
EUR – EUR Falls on Spanish Debt Concern
The euro fell broadly on Monday on fears of further credit rating downgrades in Europe while global stocks wavered as investors fled from riskier assets to the safety of bonds and gold. As a result, the 16-nation single currency fell to a session low beneath $1.31 after Moody’s said it may cut the ratings on some Spanish banks.
The euro also slid to record lows against the Swiss franc and Australian dollar as traders fretted over Europe’s debt problems. The EUR/CHF fell to 1.2633, its weakest since the EUR’s launch in 1999. Investors already were skittish after last week, when Moody’s downgraded Ireland’s credit rating by five notches. Speculation that France and Belgium may also face possible cuts in their credit ratings also rattled investors.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not commonplace and present terrific opportunities to take advantage of the price swings for large profitable gains.
JPY – Yen Records Mixed Results against Majors
The Japanese yen finished yesterday’s trading session with mixed results versus the major currencies. The Japanese currency extended gains versus the EUR on Monday, to trade around 109.95 amid a broad sell-off in the EUR. The JPY did see bearishness as well as it lost over 50 pips against the AUD and closed at 83.20.
The Japanese markets were expected to have a relatively heavier effect on the JPY versus its major currency counterparts today as the Overnight Call Rate was released during the Asian trading session.
The rate was left unchanged, but traders will be paying close attention to the Bank of Japan’s (BOJ) Press Conference that will follow to look for expectations of Japan’s economic future, especially considering the speculation that measures will be taken to devalue the yen. A bullish statement from the BOJ could lead some traders to believe that it is forecasting a rosier financial climate in Japan. Others fear that the climate is declining and monetary measures may be taken to directly influence currency prices.
Crude Oil – Crude Oil Rises Above $89 a Barrel
Crude oil prices advanced on Monday and closed around $89.20 a barrel as bitterly cold weather in Europe and the United States boosted expectations of rising heating fuel demand over the Christmas holiday period. Oil was also lifted after Congress approved last week the extension of sweeping tax cuts and a jobless benefits deal that analysts expect to boost US growth in 2011.
President Barack Obama signed the bill into law shortly after markets closed on Friday.
Looking ahead, traders are advised to watch carefully the global stock markets and the major economic indicators which will be published from the U.S. and Europe in order to predict the next movements in oil prices.
Technical News
EUR/USD
There is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the 4-hour chart’s Williams Percent Range also supports this notion. When the upward breach occurs, going long with tight stops appears to be the preferable strategy.
GBP/USD
The 4-hour chart is showing mixed signals with its RSI fluctuating in the neutral territory. However, there is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. Going long might be a wise choice.
USD/JPY
The pair has been range-trading for a while now, with no specific direction. The daily chart’s Slow Stochastic is providing us with mixed signals. The 4-hour chart does not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today.
USD/CHF
This cross experienced much bearishness yesterday, and currently stands at the 0.9630 level. There is much evidence in the chart’s oscillators that supports a possible bullish correction today. This is supported by the 4-hour chart’s Slow Stochastic. Going long with tight stops may turn out to bring big profits today.
The Wild Card
AUD/NZD
The AUD/NZD cross has experienced a bullish trend for the past week. However, it seems that this trend may be coming to an end. For example, the daily chart’s Slow Stochastic signals that a bullish reversal is imminent. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
Written by Forexyard.com