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In the previous EUR/USD Weekly Review, we noted that investors were probably getting apprehensive regarding the decision for the aid payment to Greece by the IMF. The slide of the bonds make it an extremely challenging situation for the country to obtain funding too. Over in the US, the theme of a weakening growth of the economy continued and weak data indicated that too. Any negative developments regarding the US Non-Farm Payroll would probably trigger a sentiment fallout as the previous months were good.
Looking at the EUR/USD chart above, we observe that the currency pair is currently in a bullish recovery. Having dropped 800+ pips, a correction is underway.
This week, the currency pair was probably guided by the improving sentiments towards the Euro Zone, in particularly Greece. Jean-Claude Juncker of the European Union mentioned that they agreed to pay Greece the next installment of the financial aid. As a result, risk aversion went down and the yields of the Greek bonds eased.
The economic data from the Europe region remained in a somewhat neutral stance while the US economy continued to churn out mostly negative economic figures.
The US Non-Farm Payroll was released last Friday and it was worst than expected. While the figures indicated an overall increase in jobs, it was much lower than expected and was creeping slowly to the negative zone. The US unemployment rate went up to 9.1% too creating a knee jerk reaction sales of the US Dollar.
Folks who are new to TheGeekKnows, it is always in my opinion that the US economy is a troubled one. Mounting debts continue to put strains on the prospect of growth and the weak housing and employment market post 2008 complicates the situation. While one may argue that a low interest rate is needed to spur liquidity and expansion, it may be eroding the US Dollar’s value in the long run. Many economists fear that America may already be past the point of no return, ie eventual default.
Over in the Euro Zone, while different countries and their respective states of their economies complicate matters too, it is a fortunate relieve that it also prevents a complete infection of the economies when financial crisis strikes. Germany and France are playing the lead roles in ensuring that the Euro Zone gets on it’s feet as quickly as possible after the 2008 financial crisis.
As mentioned earlier, the Greek situation is improving for now due to the agreement of the deployment of the next installment of aid. Furthermore, there are discussions on an expanded aid solution whereby it is conditional and involves the private sector. This sparks the possibility of further leverage for improvement and sentiments are improving because of this. Furthermore, the European Central Bank may be hiking it’s interest rates again as a means to combat inflation and hence speculative demand for the Euro is raising.
From a technical point of view as mentioned last week, 1.46 was a target and it was achieved. We may be seeing 1.48 next if the bullish correction continues. Should the poor US Non-Farm Payroll triggers an attack of risk aversion next week, do be on a lookout for 1.44.
Important economic data is due next week. Data such as the Euro Zone Retail Sales and minimum bid rate can offer more clues to the state of the economy.
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