Euro Rally on Hold as Finance Ministers Begin Key Meeting

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The EUR/USD is trading lower as investors focus on the Euro Zone finance ministers’ two-day meeting in Luxembourg. At issue are the debt management efforts by several problem countries namely Greece and Spain. 

Traders will be interested in any moves by officials to mend the disagreements between Greece and the troika so that the country can receive the latest batch of bailout funding. Additionally, traders are still trying to predict when Spain will make a formal request for its rescue package. The waiting is making traders nervous, encouraging them to pair positions instead of taking on unnecessary risk. 

Uncertainty in the Euro Zone is also weighing on the GBP/USD. Because of the lack of clarity, traders are leaving the British Pound and moving into the safety of the U.S. Dollar. Additionally, investors are worried about the U.K. economy which continues to show signs of weakness. 

The government’s austerity measures are pressuring the economy because of the lack of government spending. This solution may be beneficial in the long-run but only after consumers pay a short-term price. Last week the Bank of England refrained from implementing additional stimulus, but if conditions continue to weaken, they may announce additional bond purchases next month. 

December Crude Oil is trading weaker today. Last week’s huge rise in supply triggered a sharp decline in price. With momentum pointing lower, crude oil is expected to continue to weaken. Technically oversold indicators may trigger periodic short-covering rallies, but until there is a dramatic shift in the supply/demand situation, the downtrend will not change. 

The uncertainty over Europe is helping to underpin December Gold. Both investors and speculators seem to be keeping a constant bid under the market which is preventing it from selling off when the U.S. Dollar rises. The $1800.00 level seems to be a significant resistance level. This price stopped the rally in February and last week. Based on recent performance, a drop in the dollar is likely to trigger a rally in gold, but a rally in the dollar does not necessarily mean gold will weaken. 

Besides the situation in Europe, traders are also focusing on developing weakness in China. This has the potential to unravel the global economy which would be bearish for all higher-risk assets. 

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About: FX Empire Analyst - James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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