EUR/USD Daily Review 20 May 10

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Good day forex traders.

Today is Thursday and we should be preparing for the end of the week. If you are green in profit, well done and stay so. If you are not, do not let emotional trading overcome you and try to minimize your loses.

Yesterday we noted that the EUR/USD recovered from a bearish dip and a number of investors probably fell into that bear trap. The ban on naked short-selling by the German Chancellor caused concerns to investors as they were uncertain of the implications. However as the Chancellor continued to push for measures to tighten up future policies, investors gained some relief. Foreclosures and mortgage delinquencies in the US increased too and served as a reminder that the US still faced a long road of recovery.

The EUR/USD settled into range trading today and gave scalpers their party.

The S&P 500 received a massive hit and is now testing the 1080 line. It is nearing the 2010 low.

Oil is down at $70 +/-.

Gold is affected by the sentiments and is trading lower at $1180+.

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The US unemployment claims came out worst than expected and this destroyed the “sustained” recovery dream of investors. A leading indicator also suggested that the recovery may cool in the second half of the year. Concerns with regard to the Euro Zone crisis are still strong and there may be increasing sentiments that the US may not be able to fed off the spread of the crisis to her shores. The Federal Reserve Governor Daniel Tarullo mentioned that the current crisis in the Euro Zone poses a threat to the US and global economies. This is due to the shrinking trade and the losses banks are incurring on European investments.

From a technical point of view, the S&P 500 have fallen a distance from the height of 1200+. This may induce more investors to cover their positions, further adding to the selling pressure. The obvious drop in oil and gold prices suggest a general correction of the markets and this may be a force to be reckon with. Be on a lookout for risk aversion.

A number of currencies have moved today and it remains to be seen if the EUR/USD will be playing catch up. Hence do be careful on this.

Among tomorrow’s economic releases comes the German Ifo Business Climate. This is a highly regarded indicator and investors will be monitoring it closely.

Bullish moves may test 1.2400/440/500.

A return of bearish forces may see the currency pair heading towards 1.2330/300/200.

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I was considering a trade in a currency pair that i was not familiar with and i had a discussion with a few of the senior koalas. They brought out a point that i did not notice and that gave new insights to my evaluation. Suddenly a thought came upon me about this wonderful community of ours. The forex koala spirit is all about learning forex together. No one is a master and we are here to help one another. Cheers!

Trade safely.

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