The euro held near a two-month high against the USD during the Asian trading session on Tuesday, with $1.37 firmly in its sight as the market showed only the barest signs of fatigue after a 6% rally in the past two weeks. The EUR was up around 0.3% at 1.3650 against the greenback after climbing as high as 1.3685, its highest since November.
USD
Dollar Declines as Stock Market Rallies
The U.S dollar fell against most of its major currencies on Monday, hitting its lowest level in nearly two-months against the EUR, as gains in stocks prompted investors to wade into riskier currency trades. By yesterday’s close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.3650. The dollar experienced similar behavior against the CHF and closed at 0.9490.
The U.S. dollar had already been under pressure on expectations the U.S. Federal Reserve would not rush to raise its interest rates and on the growing view that the greenback has become a funding currency for carry trades. In addition, analysts attributed the fall in the dollar, which has been treated as a lower risk and safe-haven investment, to growing optimism that the worst of the financial crisis has passed. This has caused investors to buy higher-yielding currencies which rallied earlier this month.
Looking ahead to today, the most important economic indicator in today’s trading is the Consumer Confidence around 15:00 GMT. This report is very important and is likely to generate dollar volatility. Traders should pay close attention to the market as there will likely be several opportunities for traders to capitalize on the market fluctuations which are likely to follow this release.
EUR
EUR/USD Hits Two-Month High
The EUR rallied against the dollar on Monday, hitting a two-month high near $1.37 as expectations of higher euro zone interest rates sparked traders to push the currency above important technical levels. The EUR was up around 0.3% at 1.3650 after climbing as high as 1.3685, its highest since November.
Political turmoil in Ireland again highlighted problems in indebted euro zone countries and a suicide bombing at Russia’s biggest airport capped the European currency’s rise. But the euro gained momentum in the New York session, and traders said tough talk on inflation from European Central Bank President Jean-Claude Trichet on Sunday was a catalyst driving it to its highest level since November.
In addition, solid data on euro zone industrial orders and a robust euro zone flash estimate of services purchasing managers activity also bolstered the currency.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains.
JPY
Yen Experience Mix Results against Major Currencies
The Japanese yen completed yesterday’s trading session with mixed results versus the major currencies. The JPY fell against the CHF yesterday, pushing the oft-traded currency pair to 86.90. The JPY was unchanged vs. the EUR yesterday and closed its trading session at around the 112.55 level. The JPY did see some bullishness as well as it gained 40 points against the USD and closed at around 82.45.
The Japanese markets were expected to have a relatively heavier effect on the JPY versus its major currency counterparts today as the Overnight Call Rate was released during the Asian trading session.
The rate was left unchanged, but traders will be paying close attention to the Bank of Japan (BOJ) Press Conference, tentatively scheduled for today, to look for expectations of Japan’s economic future, especially considering the speculation that measures will be taken to devalue the yen. A bullish statement from the BOJ could lead some traders to believe that it is forecasting a rosier financial climate in Japan. Others fear that the climate is declining and monetary measures may be taken to directly influence currency prices.
Crude Oil
Crude Oil Falls 1%
Oil fell more than 1% to around $82.70 a barrel on Monday as ample U.S. inventories were seen and after Saudi Arabia’s oil minister expressed concerns about the influence of speculators on prices.
A Saudi Arabian oil official issued remarks which indicated that the Organization of Petroleum Exporting Countries could raise production this year due to a faster than expected growth in demand for the cartel’s oil.
As for today, traders are advised to watch carefully the leading stock markets and the major economic indicators which will be published from the U.S. and euro-zone in order to predict the next movements in oil prices.
Technical News
EUR/USD
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart’s RSI. Going short with tight stops may turn out to pay off today.
GBP/USD
The GBP/USD cross has experienced a bullish trend for the past 3 weeks. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the overbought territory, indicating that a downward correction will happen soon. Going short with tight stops might be a wise choice.
USD/JPY
The pair has been range-trading for a while now, with no specific direction. The daily chart’s Slow Stochastic is providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
USD/CHF
The daily chart is showing mixed signals with its RSI fluctuating in neutral territory. However, the 4-hour Chart’s RSI is already floating in oversold territory indicating that a bullish correction might take place in the near future. Going long with tight stops might be the right strategy today.
The Wild Card
Crude Oil
Crude oil prices are once again dropping, and the commodity is currently trading around $87.50 per barrel. Now, the 8-hour chart’s RSI is giving bullish signals, indicating that crude oil may go up. This might give forex traders a great opportunity to enter the upcoming bullish trend at a great price.
