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Good day forex trading koalas!
It is 2011 and a happy new year to you
In the previous EURUSD weekly review, we noted that the interest rate hike by China might affect the markets. China is often seen as a major economic player to lead the world out of the recession and hence any effort to curb speculative growth may bring about fears of a stall in recovery. We also note that the 200 SMA lies around the 1.3 line and it may be a strong support.
Looking at the EUR/USD chart above, we can see that the 200 SMA did indeed served as a support region. The week turned out to be a bullish week but it might be due to the low liquidity from the holiday season.
Early in the week while the EURUSD apparently did not react much to the China interest rate hike, global equities fell. There were signs of the currency pair drifting upwards but a poorer than expected US S&P/CS Composite-20 HPI, which is an index of property prices, caused concerns among investors with regards to a sluggish US economy. The EUR/USD dropped to test the 1.32 resistance turned support.
As we moved into mid week, the signs of dropping liquidity began to surface. The currency pair moved unexpectedly in extended ranges.
Towards the end of the week, the US Unemployment Claims and Pending Home Sales both clocked in better than expected. As both the employment and housing markets are crucial to the American economy, these positive results probably brought about optimism towards the US economy. In view of the lack of volume, the EUR/USD probably moved unchecked and this lead to a bullish spike up towards the 1.34 region close for the year.
It was reported that China’s manufacturing growth slowed in December. This was the first time in five months. This may trigger intensifying concerns regarding the effect of any cooling off of China’s growth, adding on to the shock felt when China increased it’s interest rates in a bid to curb inflation and rising home / food prices earlier on. A fund manager was earlier reported as mentioning that China is a main focus for 2011.
Next week brings us many important economic data. Lineups include the US FOMC Meeting Minutes and US Non-Farm Payroll. Investors will be monitoring to see if the recovery of the US economy continues and how the effects of the quantitative easing policy is holding up. You can find the list of the various economic releases in the Economic Calender below.
As the New Year Celebrations wrap up over the weekend, expect lower than usual liquidity to continue next week. Be careful as currency movements may continue to be volatile.
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