EUR/USD Weekly Review 9 Oct 11

Good day forex traders.

How is your beautiful weekend coming along? I spent half of it hibernating. Sleeping in true koala style!

In the previous EUR/USD weekly review, we noted that the 1.34 line held as a support. However there were multiple attempts to break the floor and that was an indication of a strong bearish pressure. Both the SMA 20 and SMA 50 were pointing downwards and hence the possibility of a continued bearish momentum was high. The SMA 200 was rounding the top to become downwards soon. Being an indicator for long term trend, such a development would further add to the possibility of a sustained bearish momentum. From a fundamental analysis point of view, stocks in Europe posted the largest weekly gain in 14 months and it was probably due to better sentiments as a result of the successful German vote for an enhanced euro zone rescue fund. More economists were believing that a cut of the benchmark interest rate would be done soon by the ECB. This might further reduce long term demand for the euro currency. In the US, the Federal Reserve’s Operation Twist got going with the buying and selling of bonds.

 

From a technical point of view, the 1.34 line remained pivotal for the EUR/USD as seen in the chart above. As mentioned previously, the SMA 20 may serve as an immediate resistance and this is seen above too.

SMA 20 = downwards

SMA 50 = downwards

With both SMAs still downwards, the possibility of further bearish moves remains. Having said so, we may expect that the 1.32 and 1.34 to be instrumental as supports. SMA 200 remains flat and close observation should be continued.

The European Central Bank ECB did not lower the minimum bid rate of the euro currency. A number of economists are expecting this to materialize sooner or later and hence this probably helped shored up demand for the euro currency for now. There are also reports that a plan by the ECB to recapitalize the European banks is gaining traction and optimism is thus improving. The Bank of England BOE was also reported to have raised the ceiling for debt purchases. This quantitative easing is generally welcomed by the markets.

With regards to Greece, opinions continue to defer from time to time and Germany’s debate on a Greek default was cited as a Germany only debate rather than an European debate.

In the US, the US Non-Farm Payroll came out better than expected. However unemployment rate remained high at 9.1%. An economic data regarding consumer credit in the US was released and it was a $9.5 billion decrease. This suggested that the American public are actively paying down their debt or a lack of confidence to spend on non-essential goods remains.

Trade safely for the upcoming week as we expect more economic statistics and events such as the FOMC meeting minutes and the G20 meetings.

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