EUR/USD Steadies on Hope of Greece Debt Restructuring Agreement

02/11/2015 9:00 am EST

Focus: FOREX

In this article, James Hyerczyk, at FXEmpire.com, discusses how this currency pair pattern typically indicates volatility and he explores where this pair could head next, based on this week and last week’s negotiations between Greece and the European Central Bank.

The EUR/USD is trading lower while posting an inside move. This type of chart pattern typically indicates impending volatility. The forex pair opened weak on concerns about the negotiations between Greece and the European Central Bank over the conditions of its debt financing.

EUR/USD

The market recovered after rumors surfaced that a debt extension had been reached. Speculators increased bets that the European Commission could be ready to agree to a compromise on Greece’s bailout program. The current offer on the table is a six-month extension to the country’s bailout which is due to end on February 28.

The market could trade sideways to lower the rest of the week because German Chancellor Angela Merkel said she was not looking for a “viable recommendation” until Monday while Greek Prime Minister Alexis Tsiaris reiterated his pledge to end Greece’s current bailout on Sunday.

The GBP/USD traded slightly better on Tuesday, but trading was limited. Based on the recent Bank of England interest rate decision, it looks as if traders are operating without any strong guidance from the central bank. Investors and speculators are likely to get more guidance on Thursday when Governor Mark Carney and the central bank publishes its quarterly Inflation Report.

April Comex Gold futures are operating without much guidance this week. Last week’s stronger-than-expected US Non-Farm Payrolls report sent a strong message to gold bulls that the Fed may raise interest rates as soon as June. Bullish traders are now holding on as Greece renegotiates its current debt agreement with European officials. Gold will make its next major move once the situation is clarified.

Also pressuring gold is the possibility of a resumption of the US dollar rally and the strong equity markets. Another key focus for gold traders should be US interest rates since gold doesn’t offer a yield. Rising rates generally puts pressure on gold.

Technical and fundamental factors are helping to hold crude oil in a tight range Tuesday. Technical traders are waiting for a signal to drive the market through last week’s high at $54.24. This price could be a trigger point for an extended rally into the next target at $61.62. Fundamentally, traders are waiting to see what this week’s US Energy Information Administration supply and demand report reveals.

Early Tuesday, comments from the International Energy Agency (IEA) kept many of the bullish traders on the sidelines. The IEA warned of more selloffs over the near term because it expects stocks to continue to rise.

By James Hyerczyk, Analyst, FXEmpire.com

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