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Good day forex trading koalas.

With the end of the month almost upon us, i hope everyone is green with profits. Forex trading is not an easy get rich quick method and much must be done to ensure success.

In the previous review, we noted that the week might be plagued with concerns from the middle east escalations. Sentiments might be affected.

Looking at the EUR/USD daily chart above, we note that the currency pair remains bounded by the range of 1.34 – 1.38.

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In the beginning of the week, we were presented with a nasty spike down due to escalating conflicts in the middle east. The crossing of Iranian warships in the Suez Canal probably added to the risk aversion. Having said so, moments later the EURUSD spiked back upwards. The range was more than 100 pips and could have easily wiped out trading positions on both sides. The demand for the Euro was probably due to hawkish suggestions by an ECB member on the risk of inflation fueling speculations of an interest hike.

Towards the end of the week as the currency pair moved up towards the 1.38 line, both oil and gold was rising in value too. Oil was rising due to concerns on supply woes. A consequence of the Libyan protests. Gold was increasing probably due to the flight to safety effect. When the economic outlook is uncertain, gold is often an investment of choice to ride out the storm.

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Equities were affected this week. It was reported that the S&P 500 fell for the week after three straight weeks of gains. This indicated that sentiments were shaky. As we move into the new week, the concerns regarding the middle east will probably remain. Libya will probably be a focus too as concerns are mounting regarding the tightening of oil supplies. With the increase of oil prices, investors speculate that it may affect the economic outlook. Funds will be withdrawn from other allocations to compensate for the increased spending on energy.

An area of excitement will be the inflation risk. A report mentioned that the Vice Chairman of the Federal Reserve and the Vice President of the European Central Bank mentioned that action will be taken to prevent any increase of inflation due to the rising oil prices. From previous experiences, the European Central Bank is often seen as more “willing” to make use of an interest rate hike to tackle inflation and hence such talk may fuel speculations that an interest rate hike is indeed possible. This may inevitably spark demand for the Euro.

From a technical point of view, we are at the top of the range for the month and if 1.38 falls, 1.4 may be next.

Next week brings many important economic events. This includes the interest rate decision by the ECB and the US Non-Farm Payroll release. You can find the list of the various economic releases in the Economic Calender below.

Trade Safely.

Related Forex Articles from the Koala Forex Training College.

  • Risk aversion in the forex market
  • Gold during risk aversion
  • US Non-Farm Payroll Review Feb 11
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