Euro zone debt concerns are once again back in the news and have led to a steep drop for the 17-nation single currency in overnight trading. The EUR/USD has dropped over 100 pips in the last 24 hours, and is currently trading below the 1.3900 level. Today, a lack of significant euro-zone news is unlikely to help the currency correct its losses.
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 | 1.3975 | 1.6255 | 84.00 | 0.9465 | 1.0170 | 0.8690 |
| 1.3935 | 1.6220 | 83.65 | 0.9430 | 1.0135 | 0.8655 | |
| 1.3900 | 1.6185 | 83.30 | 0.9400 | 1.0100 | 0.8625 | |
| Support | 1.3850 | 1.6125 | 82.60 | 0.9335 | 1.0045 | 0.8560 |
| 1.3820 | 1.6095 | 82.25 | 0.9300 | 1.0015 | 0.8530 | |
| 1.3785 | 1.6050 | 81.95 | 0.9270 | 0.9980 | 0.8485 |
Economic News
USD – US Dollar Reverses Downward Trend
Yesterday saw the US dollar break out of the downward trend it had been stuck in for the last several weeks. Analysts attributed the reversal to renewed concerns over euro-zone sovereign debt which has caused investors to revert back to the greenback. In addition, speculation that the Fed may soon be coming off its policy of quantitative easing helped lift the dollar.
The EUR/USD dropped significantly yesterday and throughout the overnight session, and is currently trading just below the 1.3900 level. Furthermore, the last 24 hours have seen the greenback move up around 60 pips vs. the Japanese yen. Currently the USD/JPY is trading at 82.81. Even the USD/CHF, which just recently hit a new record low, recorded significant gains. The pair, currently trading at 0.9355, has gone up close to 100 pips since yesterday.
Today, a lack of significant US news means that dollar values are likely to be determined by any announcements regarding debt in the euro zone. For now, most analysts are saying that the debt worries are more significant than the hawkish statements regarding European interest rates made last week. If so, the dollar is likely to see another potentially bullish trading day today.
EUR – European Debt Back in the News
The recent downgrading of Greece’s credit rating helped remind investors that the sovereign debt worries that plagued the euro not so long ago are far from over. Analysts are warning that debt concerns are likely to weigh down on the 17-nation single currency for the near future. The euro zone’s inability to combat its fiscal problems seems to outweigh last week’s comments by the president of the European Central Bank (ECB) regarding a possible interest rate hike as early as next month.
The euro dropped against virtually all of its main currency rivals yesterday, most notably the US dollar and British pound. The EUR/USD, which had risen past the 1.3400 level late last week, has taken a sharp bearish turn and is currently trading around the 1.3893 level. The EUR/GBP had dropped as low as 0.8588 yesterday, before moving up to its current level of 0.8596.
Today, traders are warned that any further mention of euro-zone debt is likely to bring the currency farther down against the dollar. Until the ECB develops a concrete plan to address the numerous fiscal problems in the peripheral euro-zone countries, the euro is unlikely to see a sustained bullish move.
JPY – Yen Takes Losses against Dollar and Sterling
The safe-haven yen lost some of its appeal yesterday as rumors began to circulate that the Fed may begin coming off its policy of quantitative easing in the near future. While no concrete plan has been announced, the mere mention of the idea caused the Japanese currency to tumble against several of its main rivals.
The USD/JPY, which had been trading below the 82.00 level earlier this week, received a significant boost yesterday and is now approaching 82.90. Meanwhile, the GBP/JPY has gone up over 80 pips in the last 24 hours and is currently trading around the 133.90 level.
Today, yen traders are advised to follow any announcements from the US regarding future moves on interest rates and quantitative easing. Even though a plan is not likely to be unveiled today, yesterday demonstrated how dramatic even the mention of a change in policy can be in the forex market.
Crude Oil – Oil Drops Slightly in Overnight Session
Crude oil began to come off its recent highs throughout the day yesterday and into the overnight session. Analysts attribute the drop to decreased demand in the US due to high prices. Currently, crude oil is trading at $104.51 a barrel, down from $105.75 yesterday afternoon.
Today, prices could drop further following the release of the US Crude Oil Inventories figure at 15:30 GMT. Analysts are predicting a surplus in US stockpiles which if true, is likely to be seen as another sign of reduced demand in the world’s largest oil consuming nation.
That being said, traders should pay attention to any developments in Libya. The fighting in that country continues to have a dramatic effect on the price of oil. Until a degree of calm is brought to the region, the price of oil is unlikely to drop significantly.
Technical News
EUR/USD
A bearish cross on the daily chart’s Slow Stochastic indicates that the pair’s recent downward trend still has room to grow. Furthermore, the Relative Strength Index on the same chart is currently in the overbought zone. Traders are advised to short their positions today.
GBP/USD
Technical indicators on the 8-hour chart are showing that the pair is oversold and may see an upward correction today. The Williams Percent Range and Relative Strength Index are both showing signs of an impending bullish move. Traders may want to go long with tight stops today.
USD/JPY
Technical indicators are providing mixed signals for this pair. The 8-hour chart’s William Percent Range is currently in overbought territory. At the same time, the daily chart’s MACD has formed a bullish cross. Traders may want to take a wait and see approach for this pair today.
USD/CHF
The 8-hour chart’s Relative Strength Index and Williams Percent Range have crossed into overbought territory, indicating a downward correction is likely to occur in the near future. Going short with tight stops may turn out to be a profitable strategy today.
The Wild Card
USD/CAD
The 8-hour chart’s Bollinger Bands have tightened, indicating that a price shift is going to occur in the near future. In addition, the daily chart’s Williams Percent Range and Relative Strength Index are in the oversold zone, indicating that the price shift is likely to be bullish. Now may be a good time for forex traders to open up long positions before the upward breach occurs.
Written by Forexyard.com