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Good day forex trading koalas.
Seems like apologies are a common sight these days but nonetheless i must apologize. Wondering where the Friday EUR/USD Daily Review went?
I FELL ASLEEP AGAIN. This time, while waiting for the PC to power up. This is crazy. I wonder whats wrong. My crazy work is turning me into a crazy koala!
In the last review, we noted that Asia did well for the week. As a result, the Asian currencies performed well too. China’s expanding economy 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. The decision of the European leaders to release the stress tests of the European banks is also contributing to the current bullish momentum. However one cannot help but worry if this is a can of worms. 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. Personally, i noted that the US debt is increasing and the risk is that it may go past the point of no return. ( Eventual default ) 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.
Looking at the EUR/USD Daily chart above, we note that the week was almost a doji, ending slightly lower.
The week started with a forex gap. China brought some well received news over the previous weekend by mentioning that it will relax the yuan’s fixed rate to the US dollar. During the economy crisis, China adopted a peg of it’s currency to the US Dollar to protect it’s exports. Many people believed that this is unfair and are pressuring for an end of the peg. Hence this news was welcomed. However we need to consider that this was just a mention and concrete actions remains to be seen. Should expectations be disappointed, we may see a return of risk aversion.
When the German Ifo Business Climate and the US Existing Home Sales came out worst than expected, already depressed sentiments from the Euro deficit crisis took a further hit. Germany, France and UK were reported to be jointly pushing for a charge of levies on banks’ balance sheets so as to ensure a fair contribution by banks to reflect the risk they pose to the financial system. This however remains debated on a wider basis across the G20. The US Treasury Secretary said that the credit market is getting better but with the expiration of the tax credit for home sales, poor home sales were starting to surface and risk aversion was seen.
Towards the end of the week, a surge in credit-default swaps on Greece dampened the sentiments. The Euro Zone crisis is far from over and Spain faces massive debt redemption next month. With the US Federal Reserve comment that the European crisis may affect the American economy and together with the poor new home sales figures, sentiments with regards to the US economy took a hit, bringing along the US dollar.
This weekend is a busy one. With the G8 and G20 meetings going on, the risk for a forex gap due to changed expectations is there.
In Shanghai, a China Central Banker said that the nation’s monetary policies are flexible and could be either tightened or loosened. While this leaves the interpretation to all, the recent comments of the unpegging of the Yuan to the US Dollar brought about a furry of excitement to the markets.
Over in the G20, with the concluded legislation to improve the capital standards of financial companies in the US, President Obama moves on to gather support for an international movement on strengthening capital standards and rules. While this sounds promising, swift action is probably not possible as there are 20 opinions to be considered.
Next week brings us the US Non Farm Payroll again. Investors will be glued to this figure as the employment market in the US remains fragile. With the recent poor performance of the employment and housing market, investors and the media are beginning to focus on the problems of the US. I always mentioned that the US problems remain a time bomb, waiting to explode.
You can find the list of the other various economic releases in the Economic Calender below.
From a technical point of view, 1.24/1.244 is a tough nut to crack. A clean breach of this will open up further upside moves.
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