The euro extended losses against the dollar on Wednesday after Portugal’s parliament rejected the government’s austerity plan, a move that will likely cause the collapse of the current administration. As a result, the euro fell 0.6% against the USD to 1.4100.
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 | 1.4404 | 1.6617 | 81.64 | 0.9266 | 1.0301 | 0.8826 |
| 1.4266 | 1.6449 | 81.27 | 0.9157 | 1.0208 | 0.8755 | |
| 1.4180 | 1.6345 | 81.10 | 0.9117 | 1.0169 | 0.8716 | |
| Support | 1.4043 | 1.6177 | 80.73 | 0.9008 | 1.0077 | 0.8645 |
| 1.3990 | 1.6114 | 80.53 | 0.8938 | 1.0024 | 0.8614 | |
| 1.3853 | 1.5946 | 80.16 | 0.8829 | 0.9932 | 0.8543 |
Economic News
USD – Dollar Sees Modest Gains vs. Majors
The U.S. dollar rose against the EUR and British pound on Wednesday, with the euro extending losses after Portugal’s austerity plan was summarily rejected by its Parliament. By yesterday’s close, the USD rose against the GBP, pushing the oft- traded currency pair to 1.6250. The dollar experienced similar behavior against the euro and closed at 1.4100.
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 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.
Looking ahead today, the news event that may have a very large impact on the dollar and its main currency pairs in today’s trading is the Durable Goods Orders report around 12:30 GMT. This report is very important as likely to impact dollar volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.
EUR – Euro Sinks against Majors
The euro fell against most of its major currency pairs on Wednesday on concerns a political crisis in debt-ridden Portugal could force the government to seek financial aid, though currency losses should be limited, given expectations of rising euro zone interest rates. By yesterday’s close, the EUR fell 0.6% against the USD to 1.4100.The 17 nation currency experienced similar behavior against the AUD and closed at 1.3910.
The euro had eased from a 4-1/2-month against the dollar on Tuesday after failing to break through options barriers in the $1.4250 area. Analysts said the euro could dip below $1.40 in the short term, before rising toward $1.4280, the November high.
Portugal’s parliament was expected to reject austerity measures, setting the stage for the possible collapse of the minority socialist government a day before a European summit. Portuguese bond yields rose as investors priced in increased risk of a debt restructuring.
The euro zone has a few reports scheduled for today but most of the attention will be on the EU Economic Summit meeting. Depending on the statements being released from the meeting of European Union countries, it may be difficult to gauge the direction of the euro and traders should be aware of the heightened volatility in today’s market.
JPY – Yen Sees Mixed Results Yesterday
The yen finished yesterday’s trading session with mixed results versus the major currencies. The Japanese currency extended gains versus the EUR during yesterday’s trading session, to trade around 114.10 amid a broad sell-off in the EUR. The JPY did see bearishness as well as it lost over 40 pips against the AUD and closed at 81.95 levels.
Analysts expect any gains by the yen to be limited as the Bank of Japan doesn’t want the currency strengthening too much, and went as far to arrange a coordinated global intervention in currency markets last week to cap the yen.
The JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today, especially the U.S. Core Durable Goods Orders at 12:30.
OIL – Crude Oil Trades at 30-Month High
Crude oil climbed near a 30-month high to above $106 a barrel, as the U.S. and its allies attacked Libyan leader Muammar Qaddafi’s troops and protesters clashed with government forces in Syria, bolstering concern supplies will be disrupted.
Prices have advanced 16% this year as unrest spread from Tunisia to Egypt, Yemen, Bahrain and Syria. The U.S. government said that crude supplies increased as gasoline stockpiles fell to the lowest level this year.
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 U.S Durable Goods Order report, which is scheduled for today at 12:30 GMT, as this report tends to have a direct impact on the market and a correlation with oil prices.
Technical News
EUR/USD
The EUR/USD has gone increasingly bearish in the past 2 days, and currently stands at the 1.4100 level. The daily chart’s Slow Stochastic supports this currency cross to fall further today. However, the 4-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.
GBP/USD
The cross has been dropping for the past 2 days now, as it now stands at the 1.6250 level. The Slow Stochastic of the 4-hour chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by the RSI of the 2-hour chart. Going long with tight stops may turn out to be the right choice today.
USD/JPY
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic is providing mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
USD/CHF
The pair has recorded much bearish behavior in the past several weeks. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the 4-hour chart’s RSI. Going long with tight stops may turn out to pay off today.
The Wild Card
Silver
Silver prices rose significantly in the last few days and peaked at $37.22 for an ounce. However, the 8-hour chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is losing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
Written by Forexyard.com