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In the previous review we noted that the market was concerned about speculated moves by China to curb speculative growth. The frequent debates over measures regarding the Euro Zone deficit crisis were probably affecting sentiments too.

Looking at the EUR/USD chart above, we can see that the EURUSD ended the week somewhat near the opening causing a doji pattern on the weekly.

In the beginning of the week, the currency pair gained a bullish momentum. Despite an inflation of 5.1%, China did not raise interest rates and the investors were relieved. Risk appetite soared. While positive economic data continued to be released by both the US and the Euro Zone, it was reported that the ECB may request an increase in funding to protect it from losses of it’s bond purchase policy. This caused some concern in the market.

Midweek brought bearish momentum to the EUR/USD. Anticipation of the Euro Zone deficit summit probably caused risk aversion. As the usual safe assets are the US Dollar / Gold, the demand for the US Dollar increased causing the EURUSD to drop. It was feared that nothing would come out of the summit due to the differences.

Towards the end of the week risk aversion continued to strike. The credit rating of Ireland was downgraded by Moody’s by five notches and the outing was described as negative. Investors do not like a troubled nation let alone a troubled region.

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While the US economy reported various positive statistics this week, the positivity was not enough to clear the storms of the Euro Zone. Continued apprehension regarding the future of the Euro Zone plagued the markets. Investors feared that the deficit crisis may spread to the other Euro Zone nations after taking down Greece and Ireland. The apparent slow pace of developments in terms of a Euro Zone solution for the deficit crisis is probably causing damage to the situation. Having said so, this is probably expected as countries of various economic strengths and objectives make up the Euro Zone.

Alan Greenspan the former Federal Reserve Chairman believes that the US economy is picking up. He is looking at a 3 – 3.5 % growth next year and sees that the unemployment rate should start coming down next year.

From a technical point of view, while we closed the week with the EUR/USD below 1.32, support and resistance lines are never a single pip. Should the markets fail to bring it up beyond 1.32, we may be opening up a test of the 1.3 line.

Among the economic data due next week brings the US Existing and New home sales, etc. You can find the list of the various economic releases in the Economic Calender below.

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Related Forex Articles from the Koala Forex Training College.

  • Risk aversion and the forex market
  • Support and Resistance are never a single line
  • Read more Forex Articles and Views by The Koala at

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