Simultaneous Release at
Good day forex trading koalas.
Welcome to another EUR/USD Weekly Review. I hope the week ended in green for you. One needs to be focused and disciplined to make money in forex.
In the previous review, we noted that damage control done with regards to the sentiments regarding Hungary. The comment that there was grave possibility of a default was regrettable. A survey showed that global views towards the European Union in terms of business opportunity had fallen sharply. Most investors felt that the European Union probably has the worst investment opportunity. The threat of strikes in Spain looms. China’s exports increased and this indicated that global trade was still functioning and sentiments improved. France and Germany called for quick action to curb financial speculations. Japan and Australia posted good economic data and joined the economic growth club together with China. In the US, Fed chairman Bernanke mentioned that the recovery in the US is “moderately paced” and acknowledged the unemployment problem. US unemployment claims came out worst than expected and retail sales was bad.
Looking at the EUR/USD Chart above, we note that the week is indeed a very bullish one.
Early week, the sentiments in Europe improved. A bullish forex gap was seen over the weekend too. Euro Zone industrial production was up and this might be due to the increased exports as a result of a lower valued currency. The MSCI World, a gauge of the world equities performance, rose above the highest closing level since May 19. Having said so, we need to be reminded that the economy remains fragile. A report indicated that investors interest in the bonds of European banks dropped due to the concern that the banks might be over exposed to the troubled sovereign debts. This increased difficulty in securing funds may cause the banks to suffer from a credit crunch. Although Moody cut Greece’s credit rating to junk, the EUR/USD only took a minor dent. The market might be less concerned with Greece by now unless something adverse happens. Spain is the current focus of the market. Spain faces massive debt redemption. Strong economic data flowing from the US helped kept the sentiments positive. The US TIC Long-Term Purchases suggested increased foreign demand for US investments.This indicated that the global economy is moving. Slowly but surely.
Mid week, speculations that the IMF, EU and US Treasury were planning for a credit line of up to 250 billion Euros for Spain threatened to derail the bullish momentum. However it was denied “firmly” by the European Union. Being the country with the third largest deficit in the Euro region, there is much to be done for Spain. To further complicate matters, general strikes are been called for. New building permits in the US were disappointing as the tax credit program of the US government had expired. A report stated that Russia is considering to add Canadian and Australia dollars to it’s foreign reserves. to probably reduce volatility.
Towards the end of the week, the Bank of Spain decided to release the results of stress tests on banks. This is welcomed by many due to the increased transparency but many investors felt worried too as this may highlight possible bad data and may dampen sentiment. A robust back up mechanism will be needed. There was risk aversion but the bond sales by Spain attracted good demand, increasing positivity. The MSCI world index of stocks rose for the ninth day. In the meanwhile, the US continued to produce weak data. A manufacturing index came out much worst than expected and the unemployment claims increased. The former Federal Reserve Chairman Greenspan warned about the US’s increasing debt and said that a “tectonic shift” in fiscal policy is needed to stop the debt.
Asia had a great run this this week and the Asian currencies strengthened. China’s economy is expanding and is providing a uplift to the rest of the economies. Investors are confident that the Asia region is probably able to weather the Euro Zone crisis. Be careful for any indication of China taking actions to curb speculative growth as this may cause concerns.
The current bullish momentum is being urged along by the decision of the European leaders to release the stress tests of the European banks. However i will like to remind you that many of the investors are worried that the stress tests may highlight problematic issues and may dampen sentiments. A robust fall back mechanism would be needed. Pay close attention to the results when they are released. Risk aversion may surface.
I mentioned yesterday that the former Federal Reserve Chairman Greenspan warned about the US’s increasing debt and said that a “tectonic shift” in fiscal policy is needed to stop the debt. This is indeed what i have been warning for a long time. The US debt is increasing and runs the risk of going past the point of no return. ( Eventual default ) In fact some investors believe that the US is already past this point and it is only a matter of times before she collapses under the weight of her own debts.
From a technical point of view, we are approaching the top of the current range at 1.2440. Should the momentum cut through the line, we may see 1.2550/1.2645 in the future. If the EUR/USD fails to break through the support, the bottom of the current range will be 1.2135. Do remember that support and resistance lines are never a single pip.
We have numerous important releases including the German Ifo Business Climate and US Federal Fund rates tomorrow and hence put on your seat belt. You can find the list of the various economic releases in the Economic Calender below.
If you are on Facebook, i urge you to join TheGeekKnows.com page. Discussions on forex opinions and trades can be found there with over 400 fans
Related Forex Articles from the Koala Forex Training College.
Read more Forex Articles and Views by The Koala at
©2010 FX Instructor Forex Blog - For Traders, By Traders. All Rights Reserved.