Source: ForexYard
Trading this past week of the EUR/USD was characterized by larger than normal price changes with the pair falling to a key support level and then dramatically rising. Traders this week are looking to gain from the continued bullishness in the pair amid tense market conditions that could continue through the middle of the week.
Economic News
USD – Mixed Signals coming from the U.S Economy are affecting the USD
Last week was an extremely volatile trading session for the greenback. The Dollar first depreciated against most of the major currencies, however just before the week ended, the USD saw bullish trends at all fronts, driving it back to former levels vs. the majors.
One reason that could explain the vexed trading is the contradicting economic publications that took place this week. On one hand the housing sector and the employment condition aren’t giving even the slightest clue that the economy is stabilizing. The Building Permits indicator dropped to merely 0.52M new residential building permits issued during January, and the Housing Starts indicator showed that only 0.47M new residential buildings began construction during January. Just to help you understand the severity of these figures, during June 2008, 1.09M new permits were issued, and 1.07M new buildings began construction. In addition, the weekly Unemployment Claims reveled that once again, over 600K people have filed for unemployment insurance for the first time. However, on the other hand, it seems that the price of goods and services in the U.S. is stabilizing. The Producer Price Index gave a surprising positive result, reflected in 0.8% rise in prices during January, and the Consumer Price Index rose as well, by 0.3%. The fact that producers are willing charge more, and that consumers are willing to pay more is one of the best signals to detect that the economy is getting healthier. However, one good month does not prove anything, and next few months will tell if the Obama administration is succeeding in stopping the financial crisis.
Looking ahead to this week, the most crucial publication could be on Friday when the Preliminary Gross Domestic Product for December will be announced and is forecasted by analysts to deliver a rather disturbing figure; it is predicted to decline by 5.4%. Such a result could lead to an angry trading day, just before the week ends. Until then, the Housing Sector indicator and the weekly Unemployment Claims should play the leading role in this week’s fundamental publications. Make sure you’ll watch closely after each of them if you want to make the biggest profits possible from this week.
EUR – EUR/USD Aims to Breach a Significant Resistance Price Level
The European currency underwent a jumpy weekly session. With the beginning of the trading week, the EUR strengthened against all the major currencies, however a batch of unfortunate publications has eliminated most of it. During last night, the EUR appreciated sharply against the Dollar and the EUR/USD is currently testing the 1.30 level.
Last week took off with an extremely surprising indication as the German Economic Sentiment dropped by 5.8 points, beating expectations for a 26.5 slide. Although the figure was still negative, it significantly better than expected and managed to spark a strong bullish trend for the EUR. However, by the end of the week both the French and the German economies have delivered some disturbing data. The French Manufacturing Purchasing Managers’ Index (PMI) dropped to 35.4 marks, failing to reach expectations for a 38.0. The German Services PMI declined to 41.6, well beneath expectations for a 45.0 mark.
As for this week, the most significant data expected from the Euro-Zone is the German Business Climate, published by the Institute for Economic Research. This indicator tends to have a massive impact on the market, and is expected to give an 83.2 mark. This forecast is well under the levels seen only few months ago, which were always above 100. Such result will probably support the current bearish trend of the EUR.
Other data to look after this week are the German Preliminary Consumer Price Index (CPI), the German Unemployment Change, and the European Core CPI. All are expected to deliver relatively positive result, which could very much initiate an uptrend for the EUR before the week ends.
JPY – Yen May Continue to Depreciate in the Long-Term
Last week the Yen continued to weaken against the major currencies. Its sharpest drop was against the EUR; however it saw bearish trends against the Dollar and the Pound as well.
Last week was filled with significant data economic data from Japan. The Japanese Preliminary Gross Domestic Product dropped by 3.3%. The contraction was the third quarter in a row of negative economic growth. This is the broadest measure of economic activity and as long as it continues to deliver negative figures, the JPY will most likely depreciate further. As expected, the Bank of Japan ruled to keep the Interest Rate at 0.10% – the lowest rate in the western world. It seems that the Japanese leaders will do anything they can to prevent the JPY from strengthening further. Traders should consider using this opportunity to open long-term short position on the JPY.
In the meantime, on Tuesday night the Japanese Trade Balance is expected to slide to -0.49T. The Japanese economy is largely dependant on its exports and such result is devastating for it. If this figure is accurate the Yen could drop sharply as a result. Also interesting will be the Japanese Retail sales and the Tokyo Core Consumer Price Index that will be published on Thursday night, and traders are advised to follow them.
OIL – Stock Markets Trends Dictate Crude Oil Prices
Crude Oil is continuing to trade around $40 a barrel. It appears that investors have correlated their investment on Crude Oil with the leading global stock markets. As long as the leading economies will continue to deliver worrying news that will damage equity markets, Crude Oil will probably retain its low price level.
In addition, Oil consumption predictions for this year are decreasing over and over again in light of the deepening global recession, and rumors that OPEC will decide to make another production cut has been circling once again.
This week traders should follow very carefully after data from the leading stock markets as they have proved to dictate Crude Oil prices lately.
Technical News
EUR/USD
The pair is in the midst of a very strong bullish trend, as it has just breached through the 1.2900 level. After a few failing attempts to test the 1.2940 level, the pair seems ready now to cross another psychological boundary. Should the breach occur, the pair will most likely see further bullish behavior
GBP/USD
The pair gained almost 150 pips since the weekend, and is now traded around the 1.4600 level. The bullish momentum was originated at the lower border of the Bollinger Bands, meaning that there is still more room left for this trend. Going long seems to be a good choice today.
USD/JPY
The 4 hour chart is showing that the pair’s bullish momentum is reversing itself, and has turned to be bearish. The bearish cross on the daily Slow Stochastic strengthens the pair’s downtrend, which might see a valid target price at 92.49.
USD/CHF
Ever since the pair reached its peak of over 1.1850, it’s been showing bearish momentum exclusively. As all oscillators on the hourly chart are providing bearish signals, a breach through the 1.1400 level will probably validate another downwards move, with the new possible target price of 1.1300.
The Wild Card – GOLD
Gold is in the midst of a very strong bullish move, as indicators are pointing up on the daily and the 4 hour chart. The Slow Stochastic on the hourly chart also points towards a current bullish momentum. In addition, there is a very distinct bullish channel forming on the daily chart, which strongly supports this bullish notion. This might be a great opportunity for forex traders to join a very promising bullish trend.
Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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