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Greetings forex trading koalas!
The weekend is here and i hope you did a great week. Now is a good time to reflect on our trading performance. For the folks over in the US enjoying the 3 days weekend, ENVY !!
In the last review, we noted disappointing economic data flowing out from the US, in particularly the housing market. Investors were worried of a stalled recovery and the idea of a double dip recession was strong. The US continues to display indications of the belief of a “loose” monetary policy to combat the crisis while the Euro Zone generally advocates tightening of controls. The EUR/USD faced the line of 1.28.
Looking at the EUR/USD chart above, the US Non-Farm Payroll day pushed the currency pair up away from the 1.28.
The S&P 500 crossed above the 1100 mark, indicating positive sentiments. Having said so, despite the apparent positivity, gold remains elevated at $1250+. Risk aversion may still be lurking around and caution is advised.
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Beginning of the week gave us weak sentiments as the US personal income fell short of the mark. This brought about concerns as lower personal income means lower consumer spending. Consumer spending is a main driver of the general economy. Furthermore this may lead to more personal debts and complicate matters.
When we approached midweek, US and China both posted good data for their industrial segments. Now, when the largest and second largest economies in the world post positive figures for their economics what can you expect? A jump in sentiments and of course the currency pair. The EUR/USD took an express train right up to 1.28′s doorsteps. This was probably urged on by the announced economic expansion of Australia too.
On Friday, the currency pair struggled to break free of the strong line of 1.28. The better than expected US Non-Farm Payroll gave it the extra boost, sending it up right at 1.2890+.
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I have mentioned this again and again and i will do so again. The US economy is not as robust as you may see it to be. Looking at the latest US Non-Farm Payroll for example, while the data is much better than expected, the data is still negative. This means jobs are still being lost. The unemployment rate is at 9.6% and this means around 1 out of 10 people is unemployed! Not exactly a situation the US economy wants to be in. Other than this, the US budget deficit is still massive and increasing. This will be a burden to bear for many years to come and a number of analysts believe that the US economy may have passed the point of no return, an eventual default.
The general Euro Zone economy is troubled too. A mixture of strong and weak economies in the group complicates matter. Imagine a group of boats with various speeds rowing out of a whirlpool while being chained together.
From a technical point of view, there is a mild bullish momentum after the currency pair hit a low of around 1.26. If the EUR/USD manages to keep above 1.28, we may see it heading for 1.3. Having said so, the 200 EMA looms above and the last time both met, the resistance was strong.
Next week brings us various economic data such as the German Factory Orders and US Trade Balance and Unemployment Claims. The US is having a bank holiday on Monday and hence be careful of low volume conditions. You can find the list of the various economic releases in the Economic Calender below.
Trade safely.
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