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Good day forex trading koalas.
In the previous review we noted that a strong bearish momentum developed. This was probably due to the concerns regarding the Euro Zone Deficit Crisis and also apprehension regarding the US Non-Farm Payroll.
Looking at the EUR/USD chart above, we see a U ride since the start of the year. A bearish week followed by a equally bullish week. Probably your new year gift ! It is such unexpected horror moves that i always warn everyone to plan your trades well and not try to pick a top or bottom especially when facing strong crazy momentum!
At the beginning of the week, the news of Japan’s support for the Euro Zone helped set the bullish pace. Investors may be thinking that with both China and Japan stepping in to support, what is there to be worried about!
Midweek brought us successful bond auctions. Spain, Italy and Portugal are all in the party and this probably brought much relief to the investors worried about a poor performance pushing the edge towards a bailout.
On Friday the EURUSD tested the 1.3455+ region. Mr Trichet mentioned that the Euro may be facing inflationary pressures and investors speculate that this may be a indication of possible interest rate hikes. The demand for Euro rose.
Equities are looking good. The S&P 500 is almost 1300 and this rally is telling much about the positive sentiments. It was reported that short selling activity has dropped.
Having said so, China increased the reserve-ratio again and this may put a dent on growth. Many investors see China as one of the key economy to lead the world out of the recession and hence any attempts by China to curb speculative growth often injects risk aversion into the markets. Furthermore the IMF mentioned that Europe has not cleared investors skepticism regarding it’s ability to financial the region’s debt. This can be seen via the extra yields demanded by investors to take up Greek and Irish bonds.
I mentioned in a previous article that a report stated that the US may face an increase of home foreclosures of around 20% in 2011. Foreclosures will probably hit a peak and in additionally, housing prices may see a bottom. The high unemployment rate in the US is not helping the situation. This may hit sentiments badly and hence we may see a correction of the market if the issues blows up.
We have a number of important economic data from both sides of the Atlantic next week and hence be careful of unexpected spikes. You can find the list of the various economic releases in the Economic Calender below.
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