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Good day forex trading koalas.
In the previous EUR/USD weekly review, i mentioned that many believed that the current bullish run is far overextended. 1.48 – 1.5 seems to be a hard ceiling and with the US Non-Farm Payroll due, we may expect the unexpected.
Looking at the EUR/USD Daily chart above, we note an extremely bearish last two days for the week.
While the currency pair ranged tightly during the first part of the week, the European Central Bank interest rate decision in the mid week probably started the bearish correction. Many investors were expecting a hike in the European interest rate due to the inflation risks. It remained status quo instead. Knee jerk reactions probably sent the EUR/USD down due to an Euro currency sell off.
Towards the end of the week, more developments happened. First it was the US Non-Farm Payroll turning out to be better than expected. While this drove more sentiments in favor of the recovering economy of America, the unexpected hike in unemployment rate probably caused confusion and disappointment. It stands at 9% now. Secondly, there was speculation that Greece may exit the Euro currency. As it is widely believed that such actions undermine the stability and confidence of the Euro currency, a knee jerk selling of the Euro currency probably happened.
From a technical point of view, the bullish momentum had come a long way. We were nearing the 1.5 level and the currency pair was at the upper trend line. The little support the lower trend line offered was indicative of the strong sell off. If the currency pair attempts to climb back into the EUR/USD bullish channel, 1.46+/- will be probably the line to watch out for. A dip below 1.42 will probably suggest a greater bearish correction.
While we all know of the problems of the American economy, the job market and housing market, let us not forget that the Euro Zone faces challenges too. The Euro Zone budget deficit crisis is still lurking and the different characteristics of the various Euro Zone countries make any coordinated policy challenging to implement.
Next is heavy on crucial economic reports such as the US TIC Long-Term Purchases and German ZEW Economic Sentiment. Hence it is important that your money management is properly implemented.
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