Monday, 8 Feb 2010

EUR/USD Climbs Back from 8-Month Low

The EUR/USD retreated from its 8-month high as traders moved back into riskier asset classes that they have been seeking to avoid due to the fiscal crisis surrounding the EU nations of Greece, Spain, and Portugal. Fears of a necessary bailout of these nations by the European Central Bank or the International Monetary Fund have put significant pressure on the 16-nation currency. As such, the currency of choice has been the dollar, fueling the currency's recent strength.

During the New York trading hours, prices for credit default swaps of Greek government bonds eased, helping the EUR/USD to appreciate. The pair was trading up at 1.3680 after opening the day at 1.3645. Both the pound and the yen were relatively unchanged against the dollar. The EUR/JPY was stronger, trading higher at 122.23 from the opening price of 121.89. The appreciation of the EUR/JPY may show how the EUR is strengthening in the market. The yen typically rises when risk aversion climbs in the market.

Spot crude oil prices were trading at $71.93, practically unchanged from their opening price. However, spot crude oil prices did fall as low as $70.76. The price is seen near the bottom of the commodity's trading range after reaching a high of $77.99 on February 3rd.

If the dollar remains strong, a continuing decline may be seen in the price of crude oil. Significant buying action has been seen as the price of spot crude oil dips below the $70 level. This price may present an opportunity for traders to go long on spot crude oil as the commodity may be oversold at this price level.