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Monday, 23 Jan 2012
Investors Eagerly Awaiting News of Greek Debt-Swap Deal
While the euro saw some upward momentum in trading last week, the real test of the currency's strength will be today, as news of a possible deal on Greek debt is announced. Traders will want to pay close attention to the planned meeting of euro-zone finance ministers scheduled for later in the day. If Greece successfully reaches a deal with its creditors regarding its debt before the meeting, the euro may receive a significant boost in afternoon trading.
USD - Dollar Likely to See Significant Movement in Heavy News Week
The US dollar took some pretty significant losses against its main currency rivals last week, as investors decided to move their funds to riskier assets. Currencies like the EUR, AUD and NZD saw gains against the greenback after successful debt auctions in France and Spain boosted hopes for a future euro-zone economic recovery.
Following last week's bearish movement, the USD is forecasted to see a fair amount of volatility in the coming days, as several major economic indicators are scheduled to be released. Most importantly, traders will want to pay attention to Wednesday's FOMC Statement, as it is likely to give clues as to when the US will raise national interest rates. Any signs that the Federal Reserve will raise rates in the coming months could generate some risk taking in the markets, which would likely cause the greenback to extend its recent losses. At the same time, should the Fed fail to announce concrete plans for an interest rate hike, safe haven currencies like the dollar could see a boost.
Turning to today, all eyes will be on the meeting of euro-zone finance ministers and any news regarding a possible Greek debt-swap deal. The EUR/USD closed a bullish run last week fairly close to the psychologically significant 1.3000 level. Should Greece announce that a deal has been reached with regards to its debt, the dollar is likely to fall further against the common currency.
EUR - Traders Anxious to See if EUR Can Extend Bullish Run
Following last week's bullish movement, traders are anxious to see if the euro can maintain its current trend this week. Successful Spanish and French debt auctions last week helped spur risk taking which led to the common currency's upward momentum. The EUR/USD closed the week above the 1.2900 level, far above its recent 17-month low. That being said, analysts are quick to warn that it will take significantly better news to get the pair trading toward the 1.4000 level again.
Today, traders will find out if last week's upward movement was temporary or represented a real reversal for the euro. A possible Greek debt-swap deal is forecasted to be announced ahead of a planned meeting of euro-zone finance ministers. The euro will likely see significant bullish momentum if Greece announces a deal which would prevent it from defaulting on its debt. At the same time, if Greece fails to reach a deal with its creditors, investors may revert back to safe haven currencies like the US dollar.
JPY - Yen Takes Losses Following Boost in Risk Taking
The yen was bearish for much of last week, following positive euro-zone news last week that boosted risk taking among investors. Losses were taken against many of its main currency rivals, including the euro and British pound. The EUR/JPY closed on Friday at 99.62, up almost 250 pips for the week. Similarly, the GBP/JPY saw significant upward movement to close out the week at 119.93.
Today, yen movement will likely be determined by euro-zone news, specifically on whether Greece will reach a deal with its creditors before defaulting on its debt. A successful deal may lead to risk taking among investors which could mean additional downward movement for the yen. Later in the week, traders will want to pay attention to Tuesday's Japanese Monetary Policy Statement. The statement is meant to illustrate the current state of the Japanese economy, including any future interest rate hikes. Traders can expect volatility following its release.
Crude Oil - Crude Oil Tumbles to Close Out the Week
Friday saw the price of crude oil tumble, as traders unloaded their positions before the February contract expired. Questions regarding Greece's possible debt swap deal also caused prices to slip as low as $98 a barrel. The commodity eventually closed trading for the weekend at $98.42.
Today's meeting of euro-zone finance ministers is likely to influence the price of crude. If investors are convinced that the euro-zone can stage a meaningful recovery in the near future, risk taking will likely ensue and crude could see some bullish movement. Traders will also want to continue monitoring the state of Middle East tensions this week. Conflict in the Middle East typically leads to supply side fears which drive up the price of oil. Any escalation in the ongoing situation between Iran and the West is likely to lead to major upward movement for crude.
Long term technical indicators are showing this pair in oversold territory, meaning that an upward correction could take place in the coming days. The weekly chart's Relative Strength Index is currently at 20, while the Williams Percent Range on the same chart has dropped below the -80 level. Going long may be a wise strategy for the pair.
According to technical indicators on the daily chart, this pair has breached the overbought zone, and could see a downward correction in the near future. A bearish cross has formed on the Stochastic Slow and the Williams Percent Range has gone above -10. Traders may want to go short on this pair.
Technical indicators on both the daily and weekly charts are showing this pair in neutral territory, meaning that no defined trend is apparent at this time. Traders may want to take a wait and see approach for the pair, as a clearer picture may present itself in the near future.
The daily chart's technical indicators are showing that following last week's bearish movement, the USD/CHF may see an upward correction in the near future. The Stochastic Slow has formed a bullish cross, while the Williams Percent Range is hovering in the oversold zone. Going long may prove to be a wise choice.
The Wild Card
Technical indicators are showing that following this pair's recent bullish movement, a downward correction may take place in the near future. The Stochastic Slow on the daily chart appears to be forming a bearish cross, while the 8-hour chart's Relative Strength Index has drifted into the overbought zone. Forex traders may want to go short in their positions ahead of a downward breach.
|03:45||JPY||10-y Bond Auction||0.61|3.7||*||-|
|10:30||AUD||AIG Construction Index||54.4||-||-|
|11:15||GBP||Autumn Forecast Statement||*||*||*|
|12:00||GBP||Asset Purchase Facility||375B||375B||-|
|12:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|12:30||USD||Challenger Job Cuts||y/y||-4.2%||*||-|
|12:54||EUR||Minimum Bid Rate||0.25%||0.25%||-|
|13:30||EUR||ECB Press Conference||*||*||*|
|13:30||USD||Prelim GDP Price Index||q/q||1.9%||1.9%||-|
|15:00||USD||Natural Gas Storage||-13B||-||-|