The euro rose to a four-month high against the U.S. dollar on Monday, on steady buying by Middle East accounts. It also appears to have been boosted by favorable interest rate differentials. The EUR reversed earlier losses made after Moody’s downgraded Greece’s sovereign ratings and assigned it a negative outlook.
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 | 1.4065 | 1.6300 | 83.25 | 0.9365 | 1.0210 | 0.8730 |
| 1.4025 | 1.6265 | 82.95 | 0.9330 | 1.0180 | 0.8695 | |
| 1.4000 | 1.6235 | 82.60 | 0.9300 | 1.0145 | 0.8660 | |
| Support | 1.3950 | 1.6175 | 82.00 | 0.9245 | 1.0100 | 0.8600 |
| 1.3920 | 1.6140 | 81.75 | 0.9215 | 1.0070 | 0.8570 | |
| 1.3885 | 1.6105 | 81.35 | 0.9170 | 1.0020 | 0.8525 |
Economic News
USD – U.S. Dollar Continues to Struggle
The U.S. dollar fell against the EUR and CAD as a surge in the price of raw materials prompted demand for assets linked to growth. As a result, the EUR/USD shot up over 80 pips before correcting itself. Currently the pair is trading around the 1.3980 level. Similarly, the USD/CAD pair fell almost 40 pips, pushing the oft-traded currency pair to 0.9729.
In addition, the dollar fell against the euro as news of a possible euro zone interest rate hike next month continues to draw investors to the 17-nation currency. However, by noon-trading yesterday the dollar managed to erase all of its losses after oil prices eased back from almost $107 barrel. Crude oil is currently trading below $105 a barrel.
The greenback also remained under broad selling pressure on expectations that U.S. interest rates will stay at very low levels for some time. Low rates reduce the attractiveness of U.S. assets and ease demand for the dollars to buy them.
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.
EUR – EUR Reaches 4-Month High vs. USD
The euro jumped to a four-month high against the U.S. dollar on Monday as expectations of a euro zone interest rate hike next month helped it vault back above $1.40, before correcting itself to 1.3970, and as investors shrugged off a ratings downgrade of Greece.
The euro also rose after an index measuring European investor confidence rose to a 3-and-a-half year high. The index, which measures sentiment in the euro region, increased to 17.1 for March from 16.7 in February, Limburg, a German-based Sentix research institute, said today.
Traders have 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 EUR in the coming months. A stronger currency is important to the euro zone 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 European exports more expensive.
JPY – Yen Higher vs. Major Currency Pairs
The Japanese yen experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The JPY extended gains versus the EUR during yesterday’s trading session and closed at 88.75. The yen also saw bullishness against the GBP as it jumped around 70 pips and closed at 133.25.
Further strengthening could be seen in the yen if other nations begin to raise interest rates in order to ward off inflation. This could potentially wreak havoc on the Japanese economy by making Japanese exports relatively more expensive when compared to their foreign counterparts.
As for today, traders have very little fundamental news emanating from Japan as the only indicator being released is the Core Machinery report. Analysts forecast the figure to increase from its previous reading. This indicator typically generates small amounts of volatility. However, the EUR appears to be clutching the reins of today’s market. Traders would be wise to note its future direction as it usually carries a heavy impact on the other currencies.
Crude Oil – Crude Oil Falls 1%
Crude Oil prices fell more than 1% on Monday to around $104.90 a barrel, reversing steep early gains as traders assessed efforts to stem the conflict in Libya and took profits in Brent’s unprecedented premium to U.S. futures.
Trading was volatile, with investors first reacting to attacks by Libyan ruler Muammar Gaddafi’s supporters to retake an oil hub from rebels. Then selling kicked in on a report that Gaddafi was seeking a deal to secure a safe exit.
As for today, traders should first and foremost follow the developments in the Middle East, as this issue will continue to impact oil prices in the near future. Traders are also advised to follow the Canadian Housing Starts report, which is scheduled for today at 13:15 GMT, as this report tends to have a direct impact on the market and a correlation with oil prices.
Technical News
EUR/USD
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s RSI signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice.
GBP/USD
The pair has been range-trading for a while now, with no specific direction. The daily chart’s Stochastic (slow) is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today.
USD/JPY
The daily chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a bullish cross forming on the 8-hour chart’s Stochastic (slow) indicating a bullish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.
USD/CHF
The USD/CHF has gone increasingly bearish in the past 3 weeks, and currently stands at the 0.9270 level. The daily chart’s Stochastic (slow) supports this currency cross to fall further today. However, the 8-hour chart’s Stochastic (slow) signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
The Wild Card
EUR/GBP
This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the 8-hour chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Stochastic (slow), pointing to an imminent downward correction. 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