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Euro Weakness - Will Euro Continue to Fall?
In the first week of May 2010 this was roughly the Forex scene - dollar was strong and continued to strengthen riding on the back of risk appetite. Euro was weakening across the board amidst Greek contagion fears. Then there was British Pound extending itself and declining ahead of election. Australian Dollar was holding narrow range leading up to Rate Decision. And finally Canadian Dollar gained as markets awaited Employment data.
But scene changed significantly as May turned to June. And it looked like Euro was hitting bottom against Yen.
For a trader to be able to deal with such complex and ever changing and unpredictable situations hour after hour needs some knowledge and analytical skills besides practice and patience. A trader has to be in touch with the market and yet detached from it. He has to learn to be focused and should continue to fine tune his analytical skills consistently. It is important for a trader to focus on limited currency pairs so that he can keep himself abreast of the happenings and events concerning his currency pairs. If he tries to make profits from every pair available he will make none. So he should zero in on which currency pairs he would concentrate on and then get seriously into it.
One of the members of my team presented me with a report about the latest phase when Euro hit a low and how he earned his profits from it. I am presenting a synopsis of it for your understanding so that you know how markets moved and he moved with them. On what factors and market events did he base his analyses and decisions and so on…
The Euro Hit its 9-Year Low Vs. The Yen following the U.S. Non-Farm Payrolls publication last week and as a result, the Euro hit the worst bottom in last 9 years against the Yen, as the EUR/JPY currency pair dropped to the 108.06 level. As a result of this upheaval it is likely that trading in the coming week is affected by the European debt crisis which doesn’t provide any significant signals of recovery. The big question now is about the Euro weakness: Will Euro continue to fall?
On economic news front - Positive Employment Data did its bit to strengthen the Dollar. The Dollar rallied against major currencies during trading sessions in 1st week of June 2010. The Dollar soared against the Euro, and the EUR/USD pair dropped below the 1.900 level. Thus Dollar strengthened against the Yen as well as Pound.
The most significant data that was published from the U.S. economy in last week of May referred to the Non-Farm Employment Change which did not succeed to reach a 521,000 rise as expected, though the end result was still a positive one. The report showed that the payrolls in the U.S. climbed by 431,000 marking a 10-year high and this happened in May itself. Also the Unemployment Rate dropped back during May.
The above employment indicators proved that the U.S. economy was on its way to recovery in spite of the European debt crisis. Besides employment indication, the housing sector also showed that it was on the path of recovery. The Pending Home Sales report, which measures the change in the number of homes under contract to be sold, have rose by 6.0% during April. It’s a positive sign indeed. I feel as long as the leading economic indication, like housing and employment, continue to deliver positive data, the Dollar will go on strengthening.
As for the coming week, since many interesting publications were expected from the U.S. economy things were naturally expected to improve and they did. The most significant news that was expected close to the weekend was, the Unemployment Claims, the Retail Sales and the Consumer Sentiment reports. With all of them showing some recovery, the Dollar did a little bit more strengthening against other major currencies.
Coming to EUR fall, it weakened to a 9-Year Low against the Yen. The Euro’s freefall continued during last week’s trading session. We saw the Euro drop 400 pips against the Dollar and about 300 pips against the Pound. Yet we know that the most significant slide was against the Yen, as the EUR/JPY pair dropped to the 108.17 level, and marked their 9-month low.
So in the first week and 2nd week of June traders were advised to follow the leading publications from the Euro-Zone and the U.S. because they did seem to have the largest impact on Crude Oil. Besides these the traders were also advised to follow the U.S. Crude Oil Inventories report that was due anytime as this publication was expected to have an instant impact on the market.
Many traders read the market movements correctly and made their profits and many slipped for a variety of reasons. But it’s not end of rope for anybody. Winners and losers both have an opportunity to give it a fresh start. We are in June. So let us watch out for what this week may have for us. What with so many pending reports, important disclosures that could shake the market and breaking news vying for our attention!
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