Market Volatility Expected Following Eurogroup Meetings
Speculations that a deal will soon be reached to provide Greece with a new round of bailout funds, combined with a better than expected German business climate figure, turned the euro bullish against most of its main currency rivals on Friday. Risk taking among investors also caused commodities, including crude oil and gold, to stage upward rallies throughout the day. Today, traders will want to pay close attention to the outcome of the Eurogroup meetings, in which the Greek bailout is going to be the main topic of discussion. Any agreement to supply Greece with additional funds could lead to further euro gains.
USD – Risk Taking Leads to Dollar Losses
The US dollar took losses against most of its higher yielding currency rivals on Friday, as positive euro-zone news led to risk taking among investors. The safe-haven USD often turns bearish when confidence in the global economic recovery goes up. Against the Swiss franc, the greenback fell close to 80 pips over the course of the day before finishing out the week at 0.9278. The USD/CAD dropped close to 60 pips during afternoon trading, eventually reaching 0.9914 before bouncing back to 0.9924 where it closed for the week.
Turning to today, all eyes are likely to be on a meeting of euro-zone finance ministers, also known as the Eurogroup meetings. If the meetings result in a new round of bailout funds for Greece, the dollar could take additional losses against its riskier currency rivals. Later in the week, US news is forecasted to impact the dollar. Traders will want to pay attention to Tuesday's Core Durable Goods Orders and CB Consumer Confidence, followed by the New Home Sales report on Wednesday and Thursday's Prelim GDP figure.
EUR – Greek Debt Deal may Result in Euro Gains Today
The euro benefited from increased confidence in the euro-zone economic recovery on Friday, following the release of a better than expected German Ifo Business Climate figure. Against the US dollar, the common currency was able to gain over 100 pips to trade as high as 1.2988, a more than three-week high. The EUR/JPY advanced around 120 pips throughout the day, eventually reaching as high 106.96, a seven-month high.
Turning to today, the euro is poised to make even more gains following the Eurogroup meetings, in which a deal to provide Greece with additional bailout funds is expected to be reached. That being said, if euro-zone finance ministers once again fail to agree on the terms for a Greek bailout, the euro, along with other higher yielding currencies and commodities, could turn bearish during the second half of the day.
Gold – Gold Turns Bullish Following Dollar Losses
Gold was able to capitalize on a drop in the value of the US dollar on Friday following an increase in confidence in the euro-zone economic recovery. A bearish dollar means that gold becomes cheaper for international buyers, and often results in an increase in prices. The precious metal was able to advance close to $20 an ounce during afternoon trading before closing out the week at $1751.41.
This week, gold traders will want to continue monitoring developments in the euro-zone and their impact on risk appetite in the marketplace. Should any news be released that would indicate the EU recovery is advancing at a quicker than expected rate, the price of gold could advance higher as a result.
Crude Oil – Signs of EU Expansion Leads to gains for Oil
The price of crude oil increased by more than $1.60 a barrel on Friday, as signs of economic expansion in the European Union, highlighted by positive German news, led to risk taking in the marketplace. The commodity, which traded as high as $88.51 during the afternoon session, closed out the week at $88.25.
This week, oil traders may want to pay attention to a batch of US news, including consumer confidence and home sales data, followed by a GDP report. Better than expected news could lead to additional gains for oil. In addition, Wednesday's crude oil inventories figure will provide important clues as to how high US demand for oil is. Lower than expected inventories would be a sign of increased demand, and may result in oil extending its bullish trend.
The Stochastic Slow on the daily chart is forming a bearish cross, indicating that a downward correction could occur in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory. Opening short positions may be a wise choice for this pair.
The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross, indicating that the price shift could be bearish. Opening short positions may be the smart choice for this pair.
The Relative Strength Index on the weekly chart is approaching the overbought zone, signaling that this pair could see a downward correction in the coming days. This theory is supported by the same chart's Williams Percent Range, which has crossed above the -20 line. Going short may be the wise choice for this pair.
While the weekly chart's Williams Percent Range has crossed into the oversold zone, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
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. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Forex traders may want to open short positions ahead of a downward breach.
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