Good day forex traders.
Welcome to our weekly EUR/USD forecast. Hope you had time to rest. If you are working over the weekends, hey no worries. It is all for a better life eh? You hang in there and do your koala best 🙂
In the previous EUR/USD forecast we noted that the SMA 20 is now flat. The bullish climb on the last day of the trading week hit a support and resistance region. An agreement to enable funds to aid trouble banks was made in the European Union Summit and the markets rallied to that.
Looking at the EUR/USD chart above, the currency pair did have a consolidations of sorts before it gave way to overwhelming bearish sentiments.
SMA 20 = Turning Bearish
SMA 50 = Bearish
The SMA 20 is turning bearish again due to the sharp dip. The current price action is a no man’s land. Either we will see a slow climb back up to the 1.2330 – 1.2450 region for some consolidation or an eventual attempt on the extended bearish target of 1.2000. The market sentiments will play a strong impact.
The European Central Bank ECB lowered the key interest rate to 0.75% and this is having a big impact on the attractiveness of the Euro. Fund managers were reported to be halting investments in the Euro Zone. Furthermore the ECB will pay nothing for overnight deposits. This is done in a bid to stimulate the economy by urging banks to lend to others, thus increasing liquidity.
Personally while i am no doctor of economics, i feel that the fallout from this move far overshadows any benefits. This is akin to a panic button pressed and the news of withdrawal / halts of investments only seek to reinforce the negative sentiments of a crumpling Euro Zone. As a result, borrowing costs will probably rise further complicating the situation.
Always remember that ultimately sentiments drive markets.
Over in the US, the worst than expected US Non-Farm Payroll also caused disappointment. The US unemployment rate remained at 8.2% and thus nothing positive was available to spur risk taking on both sides of the Atlantic.
The ECB president is due to testify on Monday and i will be waiting to see the market reaction first before i commit to any possible trading positions.
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