Hopes for Greek Bailout Deal Help Boost Riskier Assets
Higher-yielding assets, including the euro and Australian dollar, saw modest gains to start off the week yesterday, as hopes that Greece will be able to secure a new round of bailout funds in the near future led to risk taking in the marketplace. Today, traders will want to pay close attention to a meeting of euro-zone finance ministers, scheduled to take place throughout the day. Any positive developments out of the meeting with regards to Greece receiving a new bailout package could result in additional gains for the euro.
USD – Bernanke Speech Set To Impact Dollar Today
The US dollar turned bearish against several of its main currency rivals yesterday, as hopes that a deal can be reached to avert the upcoming US “fiscal cliff” led to some risk taking in the marketplace. In addition, signs that Greece is closer to receiving a new round of bailout funds helped boost higher-yielding assets. Against the Canadian dollar, the greenback fell more than 40 pips during European trading, eventually reaching as low as 0.9960. The AUD/USD advanced close to 50 pips to trade as high as 1.0410.
Today, dollar traders will want to pay attention to several US news events. At 13:30 GMT, the Building Permits figure is forecasted to come in at 0.85M, slightly below last month's 0.87M. If the indicator comes in worse than expected, the dollar could extend yesterday's bearish trend. At 17:15, Fed Chairman Bernanke is scheduled to deliver a speech regarding the pace of the US economic recovery. Any indication that the US economy is slowing down could lead to further dollar losses.
EUR – Euro-Zone Meetings May Result in Euro Volatility
Speculations that Greece may be closer to receiving a new round of bailout funds led to risk taking among investors, which helped the euro advance against several of its main currency rivals yesterday. The EUR/USD advanced more than 30 pips to trade as high as 1.2786 toward the end of European trading. Against the British pound, the common-currency gained more than 25 pips during the mid-day session to trade as high as 0.8038.
Today, traders can anticipate significant euro volatility, as a meeting of euro-zone finance ministers is set to take place. The meeting is expected to largely revolve around whether Greece is eligible to receive a new round of bailout funds. The euro could see bullish movement against both the US dollar and yen if there is an announcement that Greece will receive the funds. Conversely, if the finance ministers fail to reach an agreement regarding Greece, risk aversion may cause the euro to reverse yesterday's gains.
Gold – Bearish Dollar Leads to Gains for Gold
Gold saw moderate gains during European trading yesterday, as a bearish US dollar resulted in the precious metal becoming cheaper for international buyers. The price of gold advanced close to $10 an ounce, eventually reaching as high as $1732, before dropping back to the $1728 level.
Today, gold traders will want to pay attention to the Eurogroup meetings, scheduled to take place throughout the day. The meetings may result in approval for Greece to receive a new round of bailout funds. If true, the dollar may take further losses against the euro, which could help gold extend its bullish trend.
Crude Oil – Supply Side Fears Drive Oil Prices Higher
The price of oil saw additional gains yesterday, as an escalation in Middle East violence generated supply side fears among investors. Crude advance close to $1.50 a barrel during European trading, eventually moving above $89, its highest price in nearly two weeks.
Today, oil traders will want to continue monitoring developments regarding the ongoing conflict in Israel. There have been rumors in recent days that a cease-fire between Israel and Hamas may soon come into effect. If true, the price of crude could reverse some of its recent gains. At the same time, any increase in violence may result in oil prices climbing further.
In a sign that upward movement could occur in the coming days, the MACD/OsMA on the weekly chart appears close to forming a bullish cross. That being said, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach until a clearer picture presents itself.
The Bollinger Bands on the daily chart are beginning to narrow, indicating that a price shift could occur in the near future. Additionally, the MACD/OsMA on the same chart has formed a bullish cross. Opening long positions may be the smart choice for this pair.
The Slow Stochastic on the weekly chart appears close to forming a bearish cross, indicating that this pair could see downward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Opening short positions may be a wise choice for this pair.
Most long-term technical indicators indicate that this pair is range trading, meaning that a definitive trend is difficult to predict at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.
The Wild Card
The Williams Percent Range on the daily chart has crossed over into overbought territory, indicating that a downward correction could take place in the near future. Additionally, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of possible downward movement.
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