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Tuesday, 10 May 2011

Greece Downgrade Holds EUR/USD at 3-Week Low

Yesterday's downgrade of Greece by Standard and Poor's ratings agency from B to BB- has put significant pressure on the euro zone's common currency. The euro was holding near a three-week low versus its primary currency counterpart - the US dollar - yesterday with today's outlook appearing to favor a consolidation movement.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddownnodowndownnodown
Weekly Trenddowndowndownupdowndown
Resistance1.44051.647081.200.88251.0840115.80
1.43851.645081.000.88051.0820115.60
1.43551.642080.700.87751.0790115.30
Support1.42951.636080.100.87151.0730114.70
1.42651.633079.800.86951.0700114.40
1.42451.631079.600.86751.0680114.20

Economic News

USD - USD Holds Gains versus EUR

The US dollar experienced relatively mild bullish results yesterday as traders began to shift away from the euro following Standard and Poor's (S&P) downgrade of Greece's rating from B to BB-, and Moody's threatened to lower its outlook on Athens by several degrees. The result has been for forex traders in the euro zone to bail out of their long positions on the EUR in exchange for safer currencies like the US dollar.

The United States was strangely absent from the economic calendar yesterday, but is scheduled to come back online today with several reports. The value of the greenback, as a result, held rather steady since no news on the western side of the Atlantic pulled the currency in either direction.

The EUR/USD held near its three-week low of 1.4250, making only mild movements throughout yesterday's sessions. The USD/JPY, however, did experience some bearishness as traders appear to have preferred the safer island currency over its American counterpart.

For today, as noted previously, traders will witness America's return to the calendar with several data releases; albeit relatively unimportant. The first is a monthly indicator on the percent-change in value of imported goods purchased domestically, which will be released by the Bureau of Labor Statistics at 13:30 GMT.

While not the only remaining report for the day, the IBD/TIPP measure of economic optimism will also get published at 15:00 GMT and could give forex traders a brief glimpse into the anticipated rise in American optimism regarding economic outlook. The USD looks to have a muted trading day with current values expected to hold relatively steady.

EUR - Greece Downgrade Prevents EUR Bounce

Yesterday's downgrade of Greece by Standard and Poor's ratings agency from B to BB- has put significant pressure on the euro zone's common currency. The euro was holding near a three-week low versus its primary currency counterpart - the US dollar - yesterday with today's outlook appearing to favor a consolidation movement.

The impact carried onto the EUR by the Greek ratings downgrade potentially holds a longer-term risk throughout the broader euro zone, according to a report by Reuters. The downgrade shifts Greece one step closer to junk status, resulted in a threat by Moody's to cut its outlook on Greece by several notches, and may spur demands for more favorable conditions by other nations burdened by regional debt. The fear has so far pushed many investors away from the EUR, albeit mildly given the positive trade surplus in Germany published yesterday.

As for today, France and Italy will both publish their industrial production reports. If their data comes in line negatively, as with the other regional industrial figures from the past three weeks, the euro zone could continue to see a downturn in currency values. Switzerland's State Secretariat for Economic Affairs (SECA) will also publish a significant consumer confidence report later today. Forex traders may look to see the euro continue falling this week so long as Greece debt fears persist.

JPY - USD/JPY Approaching BOJ Intervention Levels

The JPY has been trading with largely positive results since Friday as investors turn their focus towards news out of Europe. After a week of ups and downs, the Japanese yen appears set to make gains today as investors largely flee riskier assets. The low interest rates of the Japanese economy have helped pull many investors into the safety of the yen following yesterday's downgrade of Greece by S&P's ratings agency. Rumors of Greece's exit from the euro zone last week have also sent traders fleeing for safety.

With Japan largely absent from today's economic calendar, traders still appear to be anticipating another bullish run in the JPY, though not brought about by Japanese market fundamentals. The recent flight to safety has helped the JPY, but a number of analysts and traders are beginning to wonder if or when the Bank of Japan (BOJ) will intervene in the forex market. The USD/JPY is rapidly approaching its intervention level near 80.00; what will happen beyond that point is up for debate, but many believe the BOJ simply cannot afford a stronger yen and will therefore intervene sometime in the days ahead.

Crude Oil - Crude Oil Prices Bounce Back

Oil prices rebounded yesterday with the New York Mercantile Exchange session closing just below the $102 price mark. The price for a barrel of Crude Oil felt a sharp sting last week as the US dollar surged against its main currency rival, the euro. The price for a barrel of oil saw its feet pulled out from underneath it and flopped heavily to as low as $94 a barrel by last week's closing. Today's bounce in price, however, may see the price returning to a mark approaching last week's average.

The value of the US dollar versus the euro in recent trading has been holding steady near a three-day high near 1.4250, but oil prices continued to rebound strongly as traders price in an expected boost in consumption as the driving season kicks into high gear in the Northern Hemisphere. Should oil prices persist in their bullish uptick, traders may see some corrective resistance being met near the psychological barrier at $104. Rising USD strength could also help push the value back below $100 a barrel if today's economic calendar events push the pair lower once more.

Technical News

EUR/USD

The pair has recorded much bearish behavior in the past several days. 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 8-hour chart's RSI. Going long with tight stops may turn out to pay off today.

GBP/USD

The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bullish cross forming on the daily chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.

USD/JPY

The price of this pair appears to be floating in the over-sold territory on the daily chart's RSI indicating an upward correction may be imminent. The upward direction on the 2-hour chart's Slow Stochastic also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with 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.

The Wild Card

Gold

Gold prices rose significantly yesterday and peaked at $1513.66 for an ounce. However, the 4-hour chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing 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.

Current Time: 07/25 15:37 GMT
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