EUR/USD Weekly Review 18 Jan 10 – 22 Jan 10

Hey koalas!

Welcome to another EUR/USD Weekly Review.

A bearish week indeed, the EUR/USD dropped like a rock in water and threatened the defensive lines of 1.4000

In the bigger picture, we seem to be bounded by two bearish trend lines as seen in the chart above. You will also notice the 200 EMA. This is from my learning over at The Koala System that the 200 EMA can at times help to show possible trends and resistance / support lines.

The EUR/USD is currently under the 200 EMA and it suggests that we may be continuing the bearish momentum. However we still have to be prudent as prices are known to retest previous regions in an attempt to climb back up. Should the EUR/USD fail to test and go above the 200 EMA soon, our bearish indication may be strong.

I always believed that Forex is always never about one indicator or style. It is not as easy as you think to make money in Forex With regards to this, we have to note too that the next major support we are up against is 1.4000. A significant technical line. The last time the action was here, ranging went on for some time.

As the main theme for the current bearish trend is probably risk aversion, the antidote is probably positive sentiments. Pay close attention to current issues surrounding the financial world. China’s ongoing efforts to reduce speculative growth and bubbles, Greece’s deficit problems and the latest, President Obama’s new plans to prevent excessive risk.

You have to understand that investors do not like trouble and unnecessary restrictions. For example, China has become the second largest economy in the world and hence probably no investors will like to see China slowing down. If China slows down, what will happen to the other economies that are just about recovering.

From the commodities, we can also see clues that investors are apparently pulling out from all risky investments. Once again adding on to the possibility that we may indeed be seeing a major risk aversion operation.

Next week brings us several important releases including US existing and new home sales. Home start ups bring along a string of economic activities and investors will be watching it closely. More for the US lineups are unemployment claims, Federal Fund Rates and the Fed Chairman Confirmation Vote. Oppositions and trouble to the votes may cause potential spikes in price. Over at the EURO zone, we have German Ifo Business Climate being one of the more notable release. Indeed next week is full of economic releases and hence do check the economic calender for more information. Do remember to be careful as any unexpected developments to the releases may cause unexpected price movements.

Should more positive sentiments develop, we may see the EUR/USD attempt to climb back up above 1.4200.

Needless to say, further sentiment breakdowns may have us breaching 1.4000, opening a potential drop to 1.3800.

Therefore trade safely, have proper money management and plan your trades well.

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