The U.S stock market presented another volatile session yesterday, as investors were left bamboozled, debating whether European Union leaders intend to save Greece from its debt crisis or not.
Throughout the trading day rumors hit headlines, stating that Germany could lead the pack and provide support to the battered Eastern economy. The market rallied on the rumors but was quickly stopped in its tracks as Germany’s government opposed the comments, stating that these are only rumors and no conclusive decision has been made regarding a bailout. One must note that any kind of bail-out from European leaders will have a dramatic affect on their fiscal situation.
While there is a high probability of a bail-out, no official steps have been released as officials are still considering different methods. In addition larger economies now fear that a bail-out could lead to additional requests from other economies such as Spain and Portugal, whom are also dealing with a dramatic downspin.
Despite the confusion, stocks pushed higher for the day retracing some of the prior losses. The S&P500 finished the session with a 1.30% gain, while the Nasdaq closed higher by 1.17%. Materials and Energy were the two leading sectors of the day, closing higher by 2.43% and 2.1%, respectively.
From at technical point of view the S&P500 created its second inverted hammer, after presenting a reversal on Friday. Only a break of the current secondary trend line will provide confirmation regarding a bounce to the upside.
Forex
On the Forex market the Dollar index dropped lower after touching its upper trend line resistance level. A positive session on Wall-Street and rumors that there could be a bail-out on the way for Greece lifted sentiment, sending counter parts higher. The Dollar index seems to be tipping over, but is still within its uptrend. In addition when analyzing the chart more carefully one can see that the 50 day moving average is on the verge of crossing over the 200 day moving average. This is normally classed as a bullish sign, meaning that any Dollar retraced in the Dollar could be short-lived.
On individual pairs, the EUR/USD climbed higher after being battered severely last week. The bounce was required and formed around support of $1.3725. Further positive equity sessions could lead this strongly correlated pair to higher ground. Despite that fact, one must note that yesterday’s session was classed as a ‘one-off’, meaning that further confirmation is still required to take this bounce higher.
The AUD/USD also presented a turnaround session after dropping to its 200 day moving average. To date the chart is located at a critical level above trend and its 200 day support. A break of its 200 day moving average to the downside could cause a landslide, forcing this pair to lower ground. A Technical chart has been attached below for your convenience.
The Day Ahead
On the data front, the BOE inflation report and the Fed’s statement will be released today. According to recent data inflation in the U.K will 20% by the third quarter of 2011 and could even exceed the banks comfort zone by the fourth. Recent comments from the BOE governor king have shown his concerns, as he mentioned that inflation could be even higher than predicted. Today should also be an interesting day in the U.S as many investors are expecting comments about some kind of exiting plan. Even though many still believe it is too early to raise rate, other methods could be used to reduce the amount of cash in the system.
Daily Forex Market Analysis provided by eToro
Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.
