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Good day forex trading koalas.
In the previous review, we noted that the Euro Zone faces challenges regarding the search for a successor to Mr Trichet of the European Central Bank and the high 10 years bond yields of Portugal. From a technical point of view, a possible head and shoulders pattern may be in progress.
Looking at the EUR/USD chart above, we note that the head and shoulders pattern did emerge and was just slightly short of the target. I LOVE IT WHEN MY CHARTS WORK!!! Everyone you need to remember that support and resistance lines are never a single pip.
In early week trading, the EUR/USD was range bounded. This was probably caused by disappointing economic data from both sides of the Atlantic and hence investors were taking time to weight the risks on both sides.
As the week moved on, the EURUSD slowly climbed and fell short of conquering 1.36. With the head and shoulders pattern played out almost in full earlier, any developments above 1.36 will probably signal the end of anymore head and shoulders possibilities.
On Friday, better than expected German Producer Price Index brought optimism to the Euro. The currency pair took over 1.36 and tested the 1.3680 line.
In the US, it was reported that the Republican controlled US House of Representatives voted to cut at least $61 billion in federal spending this year. This will be heavily contested by the Democrats. Investors are worried that the cuts may choke off economic reforms and render the situation worst.
An area of concern next week will be the Middle East. With the unrest spreading in the region, investors are probably seeking safe assets due to risk aversion. Furthermore with the request from Iran to send two naval ships through the Suez Canal, regional tensions are rising.
With the G20 meetings over the weekend, many investors are paying close attention to any possible clues that may suggest future economic policies. One of the main topic would be the global economic balance, an important issue.
From a technical point of view, if the EURUSD clears 1.3680, 1.38 may be a mid term target.
Next week brings us more economic release including the important German Ifo Business Climate and US Home Sales. You can find the list of the various economic releases in the Economic Calender below.
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