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Good day to all.
In my previous weekly review, i commented that the EUR/USD may consolidate further and we did indeed.
While the pair did see upside action at first, it fails later on to end the week in one of the important area that i look out for in my daily reviews.
Reason for drop?
Probably comments by the various government officials and central bank heads. Yesterday i mentioned that the ECB President mentioned that policy makers will withdraw the emergency cash gradually. Investors generally have a mixed attitude towards such comments. While this means that the economy is probably better, investors can’t help being worried about the potential problems of a premature ending of the emergency measures.
Furthermore, the situation in the US is not exactly improving much. A quick look at the Unemployment Rate by states puts Michigan at the top with a BIG 15.1%. Around 15 folks out of a 100 are unemployed. You folks know how i see consumer spending as a leading indicator of the economy and being unemployed certainly does not spell well for shopping at the local mall.
We have tested the bullish trendline twice this month, the latest being yesterday. This seems to suggest trouble breaking the 1.5000 barrier. This week spells of bearish momentum as the daily tops are getting lower as shown by my line above.
While the existence of the trendline may help boost technical support for now, my concern is with the fundamental aspects pushing the pair below.
We may see temporary weakness for now and if important releases due next week like the US Existing Homesales ( We all know how important home sales can be to an economy. If you are not familiar, i have an article on why home sales is important to an economy and it’s currency. ) and German Ifo Business Climate turn out worst than expected, we may see a pick up in risk aversion, pushing the pair below the bullish trendline. Of course if the releases are better than expected, the weakness may be relived by such and we may be on our way for another test on the 1.5000.
While nothing fundamental seems to suggest a bearish move, do note that this is taken with a long term perspective. These short terms drop are nothing but “noise” in the bigger financial world.
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