EUR/USD Forecast Review 22 May 12 4



 

Good day forex koalas.

 

Second day of the week and i hope you have already made some pips. Yesterday brought us bearish indication from the SMAs but the EUR/USD was pretty much without a specific direction.

G8 meeting was not conclusive of a concrete solution for the economic woes of the Euro Zone and hence it’s impact on the markets was limited too.

 

EUR/USD

 

Technical Analysis

The currency pair remains around the vicinity of the 1.28 region.

SMA 20 = Bearish

SMA 50 = Bearish

While the EUR/USD is still not showing a clear direction, a failure to close above 1.28 continues to reflect a bearish outlook. As mentioned, a full candle close above 1.28 is needed before any consideration of bullish correction.

 

Fundamental Analysis

It was reported that the Organization for Economic Cooperation and Development commented that Spain will continue to be in recession next year as challenging conditions continue to strain. As the Euro Zone’s fourth largest economy, this is not an encouraging sign.

It was also reported that the demand for US bonds continues to increase. This is seen as an indication of continued risk aversion.

There are 6 weeks more before the end of the previous US Federal Reserve stimulus program ” Operation Twist “. A number of investors are speculating of a new round of stimulus.

 

Trade Safely.

 

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  • http://thegeekknows.com/ The Forex Koala

    Inflation is not an obvious threat and hence many feel that the US Federal Reserve is going to unleash it’s latest economic twinkling soon.. what do you think?

  • http://thegeekknows.com/ The Forex Koala

    Inflation is not an obvious threat and hence many feel that the US Federal Reserve is going to unleash it’s latest economic twinkling soon.. what do you think?

    • http://www.facebook.com/george.mccall.5 George McCall

      I agree. The current level of unemployment in the US is the most unamerican thing around. It is almost a national disgrace and not something envisaged by the Founding Fathers back when they committed treason to establish a country independent of a then most pernicious and oppressive regime. However the foresight of Dr Ben Bernanke has prevented the repeat of a great depression which left so many scars on the nation during the last century. Whist unemployment is moderating, the levels remain to high and the speed of moderation to slow. Thus I think the Fed are under a duty to the people of America to introduce further stimulus with the object of increasing employment. I do not think that the Fed will shirk on their duty and over the coming months there will be further monetary easing. Their task fortunately is made somewhat easier by the fact there is benign inflation. Sadly the Eurozone and the UK do not have that luxury and face a significant risk of stagflation.

  • http://www.facebook.com/george.mccall.5 George McCall

    The difference between the US and the Eurozone is that the US has got a handle on the situation. The Eurozone simply has not and lurches from one challenge to the next. It is difficult to really know what to say that would in any way help Spain to resolve their position. The root of the problem is that they have built too many houses. It has many similarities to the housing problems in the US. In the film ‘Too Big to Fail’, there is a suggestion to solve the housing problem. It is to pile them all up and burn the lot. It may be a slightly frivolous suggestion, however it does have merit. There is currently in Spain massive oversupply. The basic law of supply and demand means that the prices are depressed. Whilst the prices are depressed, the is significant negative equity. Thus loans are defaulted upon and funding cannot be raised for new project with the consequential employment. Thus in simple terms it is stale mate with unemployment currently at 24% with every prospect of it rising further. The Euro heading towards parity with the Dollar would provide significant relief though is not the solution.