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Euro Flat as Traders await Details on Greece Rescue Deal

James Hyerczyk from ForexHound.com at 02/11/10


The EUR USD is trading flat to lower this morning as traders await details on the Greece rescue plan. Traders seem a little more confident this morning now that a pact has been reached. This is helping to stabilize the Euro and keep it from breaking further. Once the details of the actual decision are released, this market should rally as fresh buying and short-covering should drive it higher.


The Euro chart pattern suggests this market is being wound tightly. The longer it remains in a tight range the stronger the breakout move. A rally through this week’s high at 1.3838 should put this market on path to retrace to at least 1.4079 over the near-term.


The GBP USD is up slightly after holding on to the week’s low at 1.5534.  This market appears to be forming a support base and like the Euro is awaiting details of the Greece rescue plan. Shorts are likely to cover as the details of the rescue are released.


Technically, this market has a short-term target of 1.5801 to 1.5865. Gains could be limited because of the economic issues in the U.K. Yesterday the Bank of England lowered its inflation estimate while hinting at expanding and extending its quantitative easing program. Furthermore, just because Greece is being helped out does not mean the deficit issues facing the U.K. will go away. Over the short-run, the focus may shift away from Greece to the U.K. credit rating.


The USD JPY is trading lower. This overnight weakness comes as a surprise because the combination of the Greek rescue plan and Bernanke’s talk of raising the discount rate should have been supportive for the Dollar. Short-term overbought conditions could be triggering the weakness.


The weaker Euro is helping to support the USD CHF. The lack of selling pressure is giving this market a boost. The charts indicate a tight range which indicates impending volatility. Because of the magnitude of the situation in Greece, traders may be waiting for the actual release of the details from the EU/Greek pact before committing to the short-side. A stronger Euro later today should pressure the USD CHF because it eliminates the need for the Swiss National Bank to intervene to protect the value of its currency and its economy against deflation.


The USD CAD erased earlier gains yesterday and finished lower for the day. This weakness spilled over into the night session driving the Canadian Dollar higher. Higher gold and crude oil prices are the catalysts behind the current weakness in the USD CAD.


Technically, this current break is all related to last Friday’s closing price reversal top. The main trend on the daily chart turns down on a move through 1.0545, but losses may be limited once this pair reaches a retracement zone at 1.0501 to 1.0436.


The AUD USD surged to the upside overnight following the release of stronger than expected employment news. The number of new jobs created was nearly triple the estimate. This has once again triggered the debate over an interest rate hike by the Reserve Bank of Australia now that there is evidence the economy may be heating up.  The charts indicate this market is on course to reach a major retracement zone at .8953 to .9042.


The NZD USD is following the Australian Dollar higher. Traders are also speculating that a pact between the EU and Greece will calm the markets and drive up demand for higher yielding assets. Last night, the New Zealand Dollar entered a retracement zone at .6978 to .7019. A breakout over .7019 could trigger an acceleration to the upside to .7124 over the near-term.

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