Forex market participants had hard time trading last week and it is not likely that this week will be in any way better. Uncertainty and confusion created by the situation in Cyprus leads to volatile and unpredictable moves. Unsurprisingly, the euro is one of the hardest currencies to trade right now.
Cyprus will likely remain in the forefront of the news during the current week. An agreement was reached about rescuing the country, but it did not ease concerns of traders. If anything, the euro fell even harder after market participants digested the announcement of the deal. The exact terms are not completely clear. There were talks about losses for deposits above â¬100,000 and even the word “tax” was mentioned. It is likely that the exact details of the agreement will be revealed tomorrow. There were also reports that Dutch Finance Minister Jeroen Dijsselbloem suggested the deal as the model for the whole European Union, but he later denied such rumors, saying that Cyprus is a special case.
There are few important economic reports this week and they likely be overshadowed by the situation in Cyprus. Still, some of them are worth watching by FX traders. German unemployment is expected to be little changed, falling by about 2,000. German retail sales are expected to be less favorable, declining by 0.5 percent.
The impact of the news from the United States should be muted by the events in Europe, but the final revision of the gross domestic figure is worth mentioning. It is expected to be at 0.5 percent, compared to the preliminary estimate of 0.1 percent. Whether it will spur risk appetite or will drive traders away from the euro to the dollar remains to be seen.
Many analysts, including Forex Crunch and DailyFX, were neutral on EUR/USD as the currency pair was surprisingly stubborn in its unwillingness to break out even amid all the concerns about Cyprus. There were even speculations that such resilience means that the euro may break to the upside. Such bullish scenario does not look likely after today’s drop. Yet it was not big enough to make bears completely control the market, even though the currency definitely has bearish bias. For now, it looks wise for traders to remain on sidelines, just watching the market, ready to jump in on signs of a breakout, be to upside or downside.
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