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Monday, 12 Apr 2010
Greece Aid Package to Boost the Euro
After a relatively calm trading week, on which it seemed that the Dollar and the Yen would continue to rise, European governments have offered an aid package to Greece and have immediately created mayhem in the market. Currently the Euro and the Pound are ascending on all fronts, did you take advantage?
USD - Dollar Erases Gains vs. the Majors
The Dollar dropped against most of the major currencies during last week's trading session. The Dollar actually began last week's trading with a bullish trend, continuing the general trend of the American currency, however as the week progressed, the Dollar erased all gains against the majors.
The Dollar's bullish run which took place at the beginning of last week came mostly as the result of the positive data that was published from the U.S. economy. The U.S. housing sector continued to provide growth signals as the Pending Home Sales report delivered better-than-expected figures. The report showed that the pending sales of existing homes rose by 8.2% during February, beating expectations for a 0.5% drop. Considering that the housing sector was the trigger for the recent economic crisis, every positive data on this matter tends to boost the Dollar. However later in the week, the Dollar saw a sharp downtrend against the major currencies. This was due to two reasons. The first one was a disappointing employment data which showed that 460,000 individuals have filed for unemployment insurance for the first time during the past week. The second was the European governments' rescue package which was offered to the Greece economy. This has promptly boosted the Euro, and as a result weakened the Dollar.
As for the week ahead, there are many of interesting economic publication expected from the U.S. Traders are advised to pay special attention to the Trade Balance, the Consumer Price Index, the Retails Sales reports and the weekly Unemployment Claims. Traders are also advised to follow any development regarding the Greek aid plan, as this issue is likely to further dominate market movements for this week.
EUR - Euro Soars as European Governments Offer $61 Billion Aid Package to Greece
The Euro is rising against all the major currencies at the moment. After a week that began with sharp drops against the majors, the Euro is now correcting its losses and the EUR/USD pair has reached above the 1.3650 level.
After the European Central Bank (ECB) declared that the Euro-Zone's Interest Rates will remain at 1.00% it seemed that the Euro will continue to trample vs. the Dollar. This came after a week that continued the past month's trend. It seemed that investors were looking for safer assets such as the Dollar and the Yen. However it now appears that investors were simply waiting for developments in the Greek frontier.
European governments have recently offered a $61 Billion rescue package for the Greek economy. This has eased concerns regarding a potential crisis in the Euro-Zone following high Greek borrowing costs, which surged to an 11-year high. The immediate reaction has boosted the Euro against all the major currencies, boosting the Euro by almost 400 pips against the Dollar since Friday. It currently seems that the preliminary impact has yet to be completed, and that the Euro has potential to strengthen even more.
Looking ahead to this week, traders should first and foremost follow any development regarding the Greek bailout package. This is by far the most significant issue at the moment, and the market is likely to respond to every notification about it. In addition, traders should also follow the major news publications from the Euro-Zone, especially from Germany, as this is also likely to impact the Euro.
JPY - Yen Sees Mixed Results against the Majors
The Yen saw volatile trading during last week's trading session. The Yen rose significantly against the Dollar, and the USD/JPY pair dropped below the 93.00 level. The Yen rose against the Euro and the Pound as well as the week began, only to erase its gains.
The main reason for the Yen's bullish trend fromm the beginning of the past week seems to be the high uncertainty in the market. Investors have concrete doubts regarding the Euro-Zone's willingness to bail out the Greek economy. This has turned investors to look for safer assets such as the Dollar and the Yen. The Yen as a result rose against all the major currencies.
However, once the European governments declared a rescue plan for Greece, the momentum has rapidly switched directions. Investors have regained confidence that the Euro-Zone will sustain this crisis, and traders promptly opened long positions on riskier investments such as the Euro and the Pound. Whenever risk-aversion is reduced in the market, the Yen is likely to weaken, and at the moment, the Yen's bearishness has potential to proceed further.
As for this week, a batch of data is expected from the Japanese economy. Traders are advised to follow the leading publications and also to pay attention to the speech by Bank of Japan Governor on Wednesday. In addition, the Greek bailout plan is likely to impact the market this week as well, and traders should remain updated on this issue.
OIL - Crude Oil Remains At $85 a Barrel
Crude oil saw mixed results during last week's trading session. Crude oil began last week with a sharp uptrend and a barrel of crude oil was traded around $87.00 a barrel. However, the bullish momentum was diminished by Wednesday and crude oil dropped back to $85 a barrel.
Crude oil rose last week due to the continuation of the positive data from the U.S. economy. The U.S. economy is the largest consumer of oil, and thus every indication regarding a possible growth in the U.S. which should contribute to higher demand for oil, is likely to support oil prices. However it appears that the market is currently satisfied with the $85 a barrel price. It merely took little disappointing U.S. weekly employment data to drop crude oil prices back to $85 a barrel.
Looking ahead to this week, traders should follow every update regarding the Greece rescue plan. If investors will have more confidence that the Euro-Zone economies will recover from this crisis, this is likely to boost oil prices. In addition, traders should also follow the major publications from the U.S. economy as they tend to have a large impact on crude oil.
The pair has broken all short term resistance levels due to this morning's sharp appreciation in the pair. The price is approaching the key 61.8% Fibonacci retracement level on the monthly chart. This price rests near the 1.3750 level. Traders should be aware of this resistance level as it may be a good opportunity to go short after the price correction.
A breach of the 1.5380 resistance level has completed the double bottom reversal pattern. This shows the recent bullish move is not a simple continuation of the long term downward trend but actually a shift in the long term trend. Traders should be long on the pair, with key resistance levels at the prices of 1.5560 and 1.5815.
The downward movement in the pair continues and shows signs of a potential larger move lower. The daily chart's 14-day Relative Strength Index has broken below both the 70 level and the indicator's uptrend line, indicating the pair could fall further, perhaps to the 92.15 support level.
This morning's price move has broken the daily chart's long term positive sloping trend line. Before traders start drawing a new trend line, they may want to wait for further confirmation that the uptrend has ceased. This can be confirmed using a number of technical tools. One such may be the breach of the daily chart's 38.2% Fibonacci level. A breach of this retracement level which rests at the price of 1.0520 could signal a new trend.
The Wild Card
Dow Jones Industrials
The stock index shot up past its resistance level of 10928. The key resistance level on the 4-hour chart contained the index's price for the previous week. Forex traders may want to go long on the breach of this resistance level.
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|01:00||AUD||CB Leading Index||m/m||0.3%||-||-|
|01:00||GBP||BoE Inflation Letter||*||*||*|
|02:30||AUD||Monetary Policy Meeting Minutes||*||*||*|
|04:00||NZD||Credit Card Spending||y/y||3.6%||-||-|
|05:30||JPY||All Industries Activity||m/m||0.6%||-||-|
|16:30||USD||FOMC Member Bullard Speaks||*||*||*|
|17:45||CAD||BOC Gov Carney Speaks||*||*||*|