Political Uncertainty Dominates The Forex Market

Despite the technical expectations, the EUR/USD rallied yesterday afternoon due to the final discussion results between EU and Greece; as they agreed to offer a 2-month extension for Greece to hit its fiscal goals and secure its final tranche of its debts.

Greece is facing a political & financial crisis which could lead the country to default on its debt, and traders are aggressively selling the Greek assets as a result. Greece’s stock market was down over 10% on the day.

EUR/USD is highly oversold due to a bounce, regardless of what happens in Greece. The European currency can only continue its upper trend line to a critical level of 1.2450. In the next few days, the pair may remain neutral; and in case of receiving some good financial data, it may reach 1.2610 ahead of the end of this year

However, if the pair can’t reach this critical level and goes back to its bearish trend, it will reach 1.2190; which is the great support level that could be reached as a result of the Greek elections.

Here are the major Resistance (R) & Support (S) levels of the EUR/USD:


S2 S1 Pivot Point R1 R2
1.2190 1.2300 1.2380 1.2450 1.2620


The Dollar’s losses, last night, benefited the Gold; as it enhanced the precious metal's situation as an alternative asset and made the USD commodities price cheaper for holders of other currencies. The expectations of the higher borrowing rates are considered bearish for the Gold; as the precious metal seeks to compete with yield-bearing assets when these rates rise.

Japanese Yen broke down to 118.00 during the U.S. morning trading session, which is considered to be the lowest level for the pair since the beginning of December 2014.

USD/JPY sharply dropped due to oil prices, as the latter dropped to five-year lows; however, the falling oil prices continued to increase the investor’s appetite regarding the demand for the safe haven JPY.

Here are the major Resistance (R) & Support (S) levels of the USD/JPY:
S2 S1 Pivot Point R1 R2
118.05 118.80 119.15 119.75 120.25


As for today’s figures, starting with China, the Consumer Price Index (CPI) is scheduled for release; measuring the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

· Actual: 1.4%
· Forecast: 1.6%
· Previous: 1.6%

A higher than expected reading should be taken as positive for the CNY, while a lower than expected reading should be taken as negative for the CNY.

Moving to Europe, the French Non-farm Payrolls announcement will be released; measuring the change in the number of employed people, excluding the farming industry and government.

· Forecast: -0.2%
· Previous: -0.2%

A higher than expected reading should be taken as positive for the EUR, while a lower than expected reading should be taken as negative for the EUR.

As for the UK, the Trade Balance announcement is scheduled for release; measuring the difference in value between imported and exported goods and services, from and to the Non-EU countries, over the reported period. A positive number indicates that more goods and services were exported than imported.

· Forecast: -3.89 B
· Previous: -4.05 B

A higher than expected reading should be taken as positive for the EUR, while a lower than expected reading should be taken as negative for the EUR.

Moving to the U.S., the Federal Budget Balance announcement will be released; which measures the difference in value between the federal government's income and expenditure during the reported month. A positive number indicates a budget surplus, while a negative number indicates a deficit.

· Forecast: -75.1 B
· Previous: -121.7 B

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

As for New Zealand, the Reserve Bank of New Zealand (RBNZ) governor will decide where to set the interest rate after consulting senior bank staff and external advisers. Traders watch interest rate changes closely as short term interest rates are the primary factor in the currency valuation.

· Forecast: 3.50%
· Previous: 3.50%

A higher than expected rate is positive for the NZD, while a lower than expected rate is negative for the NZD.

At the same time, the Reserve Bank of New Zealand's rate statement will be released; it’s the primary tool the panel uses to communicate with investors about monetary policy. It contains the outcome of the vote on the interest rates; discussing the economic outlook and offers clues on the outcome of future votes.

A more dovish than expected statement could be taken as negative for the NZD, while a more hawkish than expected statement could be taken as positive for the NZD.

Finally from Japan, the Tertiary Industry Index is scheduled for release; measuring the change in the total value of services purchased by businesses.

· Forecast: -0.1%
· Previous: 1.0%

A higher than expected reading should be taken as positive for the JPY, while a lower than expected reading should be taken as negative for the JPY.

We wish you luck in your trading activities.

Disclaimer: The prices and news mentioned in this outlook are absolutely no guarantee of future market performance. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades. Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss. Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.