Simultaneous Release at
Good day forex trading koalas.
It is the weekend again and i hope all is well.
Making money in forex is never an easy game. We must be constantly updated with the latest global events to maintain the edge.
In the last review, we noted that the economic confidence in Europe worsened in May. The Euro Zone’s unemployment rate rose to 10.1%. There were concerns about the spread of the budget deficit crisis. Spain was in the limelight as speculations were made that Spain would struggle with $38 billion of debt that is due for redemption next month. In the meanwhile, the US continued to post strong economic data. The US ISM Non-Manufacturing PMI came out above 50, indicating an expansion. US unemployment claims were lower than the previous month too. On the contrary, Euro Zone Retail Sales came out to be -1.2%.
On Friday, the US Non-Farm Payroll came out positive but the gain was not as much as expected and sentiments were affected. Having said so, the unemployment dropped to 9.7%. Over in the Euro Zone, a government official said that Hungary’s economy was in a “very grave situation.” There were concerns that the crisis was spreading to Eastern Europe. The EUR/USD took a major beating and dipped below 1.2.
Looking at the EUR/USD Daily chart above, the currency pair enjoyed a bullish week.
In early week trading, a U-turn was seen with regards to comments about Hungary’s grave economic situation. Damage control was out on full force as officials sought to calm investors down. There seemed to be a general consensus that Hungary is not the next Greece. However reports saying that a temporary stop to Germany’s share of the economic aid package for the Euro Zone continued to depress the EUR/USD. A survey even showed that global views towards the European Union in terms of business opportunity had fallen sharply. Most investors felt that the European Union probably has the worst investment opportunity. Investors noted that Spain is facing massive debt redemption next month and possible strikes might happen due to a paycut in the government sector. Investors do not like a troubled country.
In the US, troubles in Goldman Sachs held equities down. Furthermore, the G20 meetings over the weekend did not result in concrete actions taken. Fed chairman Bernanke mentioned that the recovery in the US is “moderately paced” and acknowledged the unemployment problem, saying that unemployment rates are probably going to remain high for sometime. This remains one of the reason why we have not seen the US economy climb like a rocket.
In midweek, a report came out stating that China’s exports increased by quite a bit. This suggested that global trade is still functioning and sentiments improved. It is apparently clear that the People’s Republic of China and it’s People’s economy will lead the way out of the global recession. Not willing to give up without a fight, France and Germany called for quick action to curb financial speculations. Speculations against stocks and government bonds should be banned they said. There was an initial plan for this to be ready by October but it was proposed to have this ready by the middle of next month instead. The German Chancellor believed that speculators played a part in the European deficit crisis and the plunge of the Euro currency. Investors were pleased to see two of the largest economies in the Euro Zone work closely together.
Later in the week, Japan and Australia posted good economic data and joined the economic growth club together with China. A wise choice of a club membership i must say . The markets saw an uplift of sentiments from these growth reports. While not enrolled in that exclusive club for now, ECB’s Trichet said that the ECB will continue buying bonds to curb the crisis affecting the Euro Zone. Plans include extending more assistance to troubled financial institutions struggling to raise funds in money markets. Emergency stimulus measures created during 2008 crisis will continue to stay. Having said so, this is a double edged sword as investors speculated that this may come will an extended period of low interest rate and growth. Over across the Atlantic, US unemployment claims came out worst than expected and retail sales was bad. This stopped the parties of the US bullish folks. No refunds of party charges there! This reminds us that the US is not as strong fundamentally as believed and we should always look before jumping into any bullish parties. ( go check out the amount of deficit and remember to hold on to your jaw )
Towards the end of the week, we saw some bears in action.
- The strong line of 1.2135 is challenging the currency pair. After testing the line on Friday, the EUR/USD eased back. If you notice the chart above, this line served as a strong support weeks ago.
- The poor retail sales indeed came as a shock to many. Ever ordered a package, have it delivered and opened up to discover it to be an empty box? Yeah that’s the feeling!
- Furthermore with China’s hot sizzling growth, investors are worried that the People’s government may pull back to curb the speculative growth. Something they are rather vocal about.
Reports speculate that the Euro Zone may fare better soon as now that ” money is on the table “, folks will be more at ease. This remains to be seen as countries like Spain still face potential challenges. Risk aversion is just around the corner.
From a technical point of view, the bearish momentum seem to be less intense for now suggesting that a lower EURO is not in high demand for now. Furthermore, when a currency is weak, it may help in the country’s exports and when it does it may boost economic data resulting in an inevitable rise of the currency’s value. Nonetheless, a break of 1.2135 is needed before we see a new range in trading.
Next week’s economic data includes important releases such as the German ZEW Economic Sentiment and US Building Permits. You can find the list of the various economic releases in the Economic Calender below.
If you are on Facebook, i urge you to join TheGeekKnows.com page. Discussions on forex opinions and trades can be found there with over 400 fans
Trade safely. ( I apologize for a lack of the Friday EUR/USD Daily Review. A bad headache took me out. )
Related Forex Articles from the Koala Forex Training College.
Read more Forex Articles and Views by The Koala at
©2010 FX Instructor Forex Blog - For Traders, By Traders. All Rights Reserved.