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Wednesday, 22 Dec 2010

Concerns Of Another Credit Cut Weakens The Euro Vs. The Dollar

The euro fell once again yesterday, following concerns that Portugal and Greece might face a credit downgrade within the near future. This also had a positive impact on commodities, especially crude oil, which is now trading near $90 a barrel.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownupdownnoup
Weekly Trenddowndownnodownupup
Resistance1.32101.555084.550.96551.00400.8565
1.31901.553084.350.96351.00200.8545
1.31601.550084.050.96050.99900.8515
Support1.31001.544083.450.95450.99300.8455
1.30701.541083.150.95150.99000.8425
1.30501.539082.950.94950.98800.8405

Economic News

USD - Dollar Continues To Strengthen On All Fronts

The U.S. dollar strengthened yesterday against most of the major currencies. The dollar gained about 100 pips against the euro, and the EUR/USD fell to the 1.3075 level. The dollar gained about 100 pips against the British pound as well, and about 60 pips vs. the Japanese yen.

The dollar rallied yesterday amid woes of further credit downgrades in Europe. The fragile condition of several European nations, continues to threaten the stability of the euro-zone, and as a result turns investors to put their faith in the greenback as an alternative investment.

In addition, estimations that the Commerce Department will correct its release today, and will say that the U.S. economy grew more than previously calculated in the third quarter, have also contributed to the dollar's bullishness.

Looking ahead to today, the most significant economic release seems to the U.S. Existing Home Sales. This report measures the number of buildings that were sold during November. If the end result will beat projections for 4.72M sold homes, this will indicate that the housing sector in the U.S. is recovering, and has potential to support the dollar.

EUR - Euro Tumbles amid Concerns of Further Credit Downgrades In the Region

The euro fell against most of its major currency counterparts during yesterday's trading session. The euro dropped about 100 pips against the dollar, trading near a more than two-week low against it. The euro also fell about 60 pips vs. the Japanese yen.

The euro continues to lose ground against the major currencies as the cost of protecting the sovereign bonds of both Greece and Portugal rose yesterday. Investors fear that following Ireland's credit cut, Greece and Portugal might face a credit downgrade as well. In addition, the ongoing concerns that the Irish bailout wasn't the last financial bailout required by the euro-zone continue to linger. The worse scenario is that the euro-zone will fail to rescue yet another economy, a situation that may lead to the end of the euro. As long as this type of concerns remains, the euro might see further bearishness against its major rivals.

As for today, traders are advised to follow updates regarding the European fragile economies, especially about a possible credit downgrade of Portugal, which might take place soon. Traders should take under consideration that such a credit cut is has potential to have a quick and significant bearish reaction on the euro.

JPY - Yen Rises Vs. Euro and Pound; Weakens Vs. Dollar

The Japanese yen saw mixed results against the major currencies on Tuesday's trading session. The yen gained about 60 pips against the euro, and the EUR/JPY pair is once again trading below the 110.0 level; the yen saw similar gains against the British pound as well. On the other hand, the yen fell about 60 pips vs. the U.S. dollar.

The yen's fluctuations have reflected the general mood in the market. The yen gained vs. the European currencies following the ever-deepening concerns regarding the euro-zone's stability. The latest reports regarding a possible credit cut of Portugal and Greece have intensified this trend.

The yen slightly fell against the greenback due to estimations that the Commerce Department will correct its release today, and will state that the U.S. economy grew more than previously calculated in the third quarter.

Looking ahead to today, traders are advised to follow the leading publications from the U.S. and the euro-zone as these are likely to affect the market today. Special attention should be given to reports regarding a possible credit downgrade in Europe, as unusual volatility might take place as a result.

Crude Oil - Crude Oil Reaches $90 a Barrel

Crude oil continued to rally on Tuesday and is currently trading near $90 a barrel. Crude oil gained about 100 pips yesterday, from $89 .10 a barrel, and has completed a total 250 pips rise since December 17.

Crude oil closed yesterday at $89.82 a barrel, the highest closing price since October 7, 2008. Crude prices continue to rise on speculations that the U.S. economy is strengthening. The rising Standard & Poor's 500 Index, which is trading in level not seen since 2008, is also pushing energy prices upwards on estimations that demand for oil will increase in the U.S., the world's largest energy consumer.

As for today, traders are advised to follow the leading releases from the U.S. and the euro-zone as these are likely to have a large impact on oil prices. Traders should also follow the U.S. Crude Oil Inventories release, which is scheduled for 15:30 GMT, as this release tends to have an instant impact on the market.

Technical News

EUR/USD

The pair has fallen about 400 pips over the past 8 days, and is currently trading near the 1.3130 level. Nevertheless, as the RSI on the 4-hour chart is pointing up, in addition to a bullish cross of the Slow Stochastic, it appears that the pair might see a bullish correction. Going long with tight stops might be the right strategy today.

GBP/USD

The cable began yesterday's session with a rise of about 60 pips, only to see a 130 pips fall soon after. Currently, as both the MACD and the RSI on the daily chart are providing bearish indications, it seems that another bearish session might be expected.

USD/JPY

The range-trading proceeds for the USD/JPY pair, and the pair is now trading within the middle of the range, near the 83.75 level. The current movement is bearish, and the pair appears to approach the 82.50 level. If the pair will drop below this level, it has potential to fall towards the 82.50 level.

USD/CHF

There is a very distinct bearish channel formed on the 4-hour chart, as the pair is now floating in the middle of it. The Bollinger Bands on the 1-hour chart are tightening, indicating that a sharp movement could be expected. As the RSI on the 1-day chart is about to reach the 30-line, it appears that going long might be the right choice today.

The Wild Card

Crude Oil

Crude oil rose to as high as $90.05 a barrel yesterday, the commodity's highest level since October 2008. Currently, as all oscillators on the daily chart are pointing up, it looks that crude oil might reach higher today, with potential to reach the $92.00 level. This might be a great opportunity for forex traders to join a very popular trend.

Current Time: 04/19 08:39 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/21
15:00USD+ CB Leading Index m/m0.5%0.8%-1
04/22
01:00AUD+ CB Leading Index m/m0.2%*-3
13:30CAD+ Wholesale Sales m/m0.8%0.7%-3
14:00USD+ HPI m/m0.5%0.6%-1
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