Source: ForexYard
News that pro-austerity political parties won in the Greek election held over the weekend gave the euro a boost against both the USD and JPY during overnight trading yesterday. That being said, ongoing worries regarding the Spanish banking sector outweighed the news out of Greece, and by mid-day trading the common currency had already given up all of its earlier gains. Turning to today, in addition to any developments out of the euro-zone, traders will also want to pay attention to the US Building Permits figure at 12:30 GMT. Should the figure come in below the forecasted level, it could raise expectations that the Fed will move to initiate a new round of quantitative easing, which may turn the dollar bearish.
Economic News
USD – Dollar Benefits from Spanish Banking Worries
The US dollar saw gains against several of its main currency rivals during trading yesterday, as ongoing concerns regarding Spain’s banking sector drove investors to safe-haven assets. In addition, investors remain worried about what the makeup of the new Greek government will be, despite the win of pro-austerity political parties on Sunday. The GBP/USD fell close to 100 pips over the course of the day, eventually reaching as low as 1.5636 by mid-day trading. Against the AUD, the dollar gained more than 60 over the course of European trading. The AUD/USD eventually settled at the 1.0060 level during the afternoon session.
Turning to today, dollar traders will want to pay attention to the US Building Permits figure, set to be released at 12:30 GMT. While analysts are forecasting the figure to come in roughly at the same level as last month’s, traders will want to note that most US indicators have come in below expectations as of late. Should today’s news disappoint, the dollar may give up yesterday’s gains during the afternoon session.
EUR – Spanish Banking Worries Lead to Fresh EUR Losses
After shooting up around 100 pips against both the US dollar and Japanese yen in overnight trading yesterday, the euro proceeded to give back virtually all of its gains over the course of European trading. While the reaction to Greece’s election was largely positive among investors, Spanish debt worries continued to dominate market sentiment which led to the euro’s losses. After reaching as high as 1.2746 during the Asian session, the EUR/USD fell more than 160 pips, eventually hitting 1.2590. The EUR/JPY dropped close to 150 pips during European trading, eventually reaching the 99.30 level.
Turning to today, traders will want to continue monitoring any developments out of the euro-zone, particularly with regards to Spain’s debt issues. In addition, the German ZEW Economic Sentiment, set to be released at 9:00 GMT, may create some volatility for the euro. Analysts are forecasting today’s news to come in well below last month’s figure. If true, it may lead to fears among investors that the euro-zone debt crisis is spreading, which could result in additional euro losses today.
JPY – Safe-Haven JPY Sees Significant Gains
The Japanese yen saw gains across the board yesterday, as euro-zone fears drove investors to safe-haven assets. The AUD/JPY fell close to 100 pips during European trading, eventually reaching as low as 79.31 before staging a mild upward correction later in the day. The pair eventually settled around the 79.60 level. Against the USD, the JPY gained over 40 pips, eventually reaching the 78.85 level during the mid-day session.
Whether or not the yen can maintain its bullish trend today largely depends on news from the euro-zone. Traders will want to pay attention to news out of Spain in particular. Any signs that Spanish bond yields could continue going up may result in increased risk aversion, which will likely help the JPY.
Crude Oil – Crude Oil Tumbles amid Euro-Zone Fears
After opening the week on a positive note due to the election of pro-austerity political parties in Greece, crude oil proceeded to tumble over the course of the day. Analysts attributed oil’s bearish turn Spanish bond yields, which increased to over 7% yesterday. The price of oil slid from a high of $85.49 a barrel to as low as $82.34 in mid-day trading.
Today, oil traders will want to pay attention to any ongoing developments in Spain and Italy. Any negative announcements out of either of the two countries could result in additional losses for oil. Furthermore, if the German ZEW Economic Sentiment figure comes in below expectations, oil could extend its bearish run.
Technical News
EUR/USD
Long term technical indicators are providing mixed signals for this pair. On the one hand, the weekly chart’s MACD/OsMA seems like it is about to form a bullish cross. On the other hand, the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur. Taking a wait and see approach for this pair may be the best choice.
GBP/USD
The Williams Percent Range on the daily chart is currently in the overbought zone, indicating that downward movement could occur in the near future. In addition, the Slow Stochastic on the same chart seems like it is about to form a bearish cross. Traders will want to pay attention to this indicator. If it forms the cross, it may be a good time to open short positions.
USD/JPY
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is hovering close to the oversold zone. Traders may want to go long in their positions for this pair.
USD/CHF
A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see an upward correction in the near future. This theory is supported by the Williams Percent Range on the same chart. Going long may be the best choice for this pair.
The Wild Card
EUR/AUD
The daily chart’s Relative Strength Index has dropped into the oversold zone, indicating that an upward correction could occur in the near future. Furthermore, a bullish cross has formed on the same chart’s Slow Stochastic. This may be a good time for forex traders to open long positions ahead of a possible upward correction.
Forex Market Analysis provided by ForexYard.
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