Apr 12, 2010

Forex Crunch Dramatic Weekend Gaps and Breakouts on Greek Bailout

Forex Crunch Dramatic Weekend Gaps and Breakouts on Greek Bailout

Dramatic Weekend Gaps and Breakouts on Greek Bailout

Posted: 11 Apr 2010 03:51 PM PDT


The emergency announcement of a 30M euro mechanism to bail Greece out  sent EUR/USD high above the close. Other currencies made significant leaps as well – some are big breakouts.Is it here to stay? We’ll know quite soon.

The European finance ministers made an unusually timed teleconference on Sunday, and came out with a dramatic announcement – an approval of a mechanism that will supply Greece a huge safety net for borrowing below market rates – 30 billion euros. Adding 10 billion euros of IMF money, Greece gets a big breather. Coordinations between the EU and the IMF will begin on Monday.

This news of a rescue plan are good news for the Euro, and for global recovery. The announcement came at a perfect timing for forex trading.

Just as the markets opened, traders in the Sydney session sent the dollar to the ground on risk appetite trading.

EUR/USD leaped above 1.36, a high it reached two weeks ago and reached 1.3672, the highest level since March 18th. It now trades lower, but still more than100 pips above the close on Friday. A huge weekend gap.  The Euro is not alone.

GBP/USD confirmed the break of the stubborn hurdle of 1.5350 and peaked at 1.5467 before calming down. This is the highest level since February 24th.

Another big winner is the Aussie, which jumped above the extremely strong resistance of 0.9327 and reached 0.9388, the highest since November and very close to the 2009 high of 0.9405.

The Canadian dollar isn’t enjoying this dollar weakness, as it struggles with parity, and also begins getting a status of a “safe haven” currency – sought in times of trouble and unwanted on optimism. USD/CAD didn’t make strong moves.

Is this just jumpy,thin volume trading?

This is the big question. Volume is low at the very start of the week, as it’s only Sunday evening in the US and night time in Europe. The Tokyo session didn’t begin yet, so we’re only with the Sydney session. Things could change when the Tokyo session begins at midnight GMT. These gaps could be filled.

Learning from the past, if the gaps aren’t closed within an hour of the opening of Tokyo session – it means that the market is really moving, and that the trend, dollar weakness here, will continue through the London and New York sessions.

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Forex Daily Outlook – April 12th 2010

Posted: 11 Apr 2010 12:00 PM PDT


After a week with high volatility, we have quite a few indicators to start the week, that already started with dramatic weekend gaps. Let’s see what’s up for today:

European leaders might rescue Greece – this is what pushed EUR/USD higher on Friday, after it was beaten beforehand. The Euro won’t receive any indicators today, but will move on news about the crisis. It enjoys the weekend gap strongly. Let’s see the indicators:

Japan starts the day with the Monetary Policy Meeting Minutes. They will show what the central bankers were thinking before the recent decision. Did they weigh in the option of a Yuan devaluation?

In Australia, Home Loans are predicted to drop by 0.9%, a more modest drop than last month’s 7.9% plunge. The Aussie is at a critical spot.

For more on the Aussie, read the AUD/USD forecast.

In Britain, the CB Leading Index is expected to show a small rise. The more interesting British releases come at the end of the day: BRC Retail Sales Monitor will give a good indication towards the retail sales figure.

At the same time, the RICS House Price Balance will probably show that housing prices are cooling. This will continue a trend that began a few months ago, but isn’t fully supported by other housing figures.

Also GBP/USD is at technical crossroads. For the pair’s levels, check out the British Pound forecast.

USD/CAD parity will come to another test with two important Canadian figures: Housing Starts are expected to advance from 197K to 201K. This figure surprised in recent months.

The second event comes from the central bank: the BOC Business Outlook Survey is a comprehensive quarterly survey that gives a good indication about the state of the economy. This can contain hints about future policy.

For more on USD/CAD, check out the Canadian dollar forecast.

In the US, the Federal Budget Balance is expected to show a smaller deficit this time – 155 billion dollars. A big deficit, as seen last month (220 billion), will weigh on the dollar.

That’s it for today. Happy forex trading!

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