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Good day forex trading koalas.
In the previous EUR/USD weekly review, we mentioned that things are looking better for the US. With an apparent improving employment market in the US, optimism was picking up. Investors were anticipating an interest rate hike for the Euro Zone and there was an increasing possibility of a Portugal bailout after a long speculation.
Looking at the EURUSD Daily chart above, we note that the bullish channel continued to hold.
While the start of the week brought some bearish hesitation, this was probably due to weak economic data from the Euro Zone and the US. The Euro Zone Retail Sales came out negative and the US ISM Non-Manufacturing PMI was lower than expected.
Things started to change around midweek. The German Factory Orders performed much better than expected and being the largest economy in the Euro Zone, positivity picked up. While the bail out request of Portugal gave a dent to the bullish momentum, most of the investors probably expected and priced in this already and hence nothing drastic happened.
Towards the end of the week, the increase in the Euro Zone interest rate put in place a further bullish push. While investors expected that, it gave them more reasons to believe that more would be coming and the Euro currency came under heavy demand. The EUR/USD currency pair broke through the 1.44 line.
With the latest push, the currency pair is at levels last seen at the beginning of the year. From a technical point of view, this is probably a resistance zone to look out for. If the EUR/USD does not break down next week, we may see an eventual push to the next major zone of 1.48.
With Portugal requesting for a bailout, close monitoring must be done to see if complications will develop for another Euro Zone country. This is important as a sentiment break down may derail the bullish momentum. If nothing adverse happens, the continued speculations regarding more interest hikes to combat inflation will probably fuel more demand for the Euro currency.
Over in the US, people are probably happy about the recent employment developments. Months after months of increasing employment and decreasing unemployment. A gentle reminder to all that the housing market remains depressed! People have been asking me, why is the US Dollar still weakening despite the good performance of it’s economy? Well we must never let our sights off the bigger picture. The interest rate of the US remains at a record low while other countries have already hiked theirs. Carry trade traders probably sell US Dollars in massive amounts in favor of higher yielding currencies such as the Euro or AUD Australian dollars.
Important economic events are due next week. Events such as the German ZEW Economic Sentiment, US Retail Sales and even the G7 meetings are scheduled. Remember your proper money management.
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