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Good day forex trading koalas,
it is the weekend and i hope everyone is having a nice time with your loved ones.
In the last review, we explored the various possibilities to why is the EUR/USD performing this “dance” Up it goes, down it goes, up it goes and down it goes. We realised that the market is probably more focused on poor performing economies rather than the fundamentally performing ones. Once again, we were reminded that the US economy might not be as robust as it seems due to the fact that massive deficits are mounting. With the recent string of poor data streaming out of the US, there is a danger that the media may refocus on the weakness of the US.
Looking at the EUR/USD chart above, while the recent trend is bullish, we seem to have hit ranging grounds here as the strong line of 1.3 caps the momentum for now.
Early this week, we saw the EUR/USD holding it’s ground despite negative news of the Euro Zone. The Hungarian Prime Minster plans were rejected by the EU and IMF due to a lack of substantial cut in spending. Furthermore, Ireland’s credit rating was reduced one level by Moody’s. Investors were worried that the strengthening Euro may affect the export numbers of the Euro countries. The continued stream of bad data from the US probably helped to keep things in check.
As we approached midweek, the EUR/USD dips as major risk aversion took over. Big name companies posted weak earners and the Euro Zone bank stress test results are due at the end of the week.
Towards the end of the trading week, the German Ifo Business Climate came out better than expected and a number of big name companies posted good earnings. Sentiments were uplifted and the market apparently assumed the Euro bank stress test results were positive.
The Euro bank stress test results were released. While only seven banks failed to meet the mark of the EU’s crisis scenario, the market seemed to not welcome that and the Euro retreated. The general talk seems to be that the tests were not strict enough, realistic enough and hence credibility is missing. Hungary seems to be getting into hot soup too as Moody’s mentioned that it is considering to cut the countries’ credit rating.
With the strong level of 1.3 around and the relatively unknown full implication of the results release, next week may present to us as a rocky challenging week. Pay close attention to the develops and keep in mind that the momentum these days are rather emotional than fundamental.
Many important data is expected starting with the important US New Home Sales on Monday. Investors are probably keen to see this as an indication of the US economy since the tax credit had expired. You can find the list of the various economic releases in the Economic Calender below.
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