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EUR/USD Forecast Weekly 25 Feb 13

Good day forex traders and koalas.

How was your trading last week? I hope you bagged some pips. Do remember that forex trading is never about earning big riches over night. Many traders lose their hard earned money due to impatience and over risking. For me, even a pip gained for a week is still a gain. Woot !

In the previous EUR/USD forecast we noted a weak head and shoulders pattern that may result in a bearish target of 1.3100. Fundamentally we may be facing some adverse sentiments as fresh strikes erupt in Greece against the austerity measures. This serves to remind investors that the European region is still not out of the woods yet.


Technical Analysis

Looking at the EUR/USD daily chart above we note that the currency pair did continue to be bearish. Taking out the resistance of 1.32 , it came close to our weak head and shoulders pattern bearish target of 1.3100. It has since retreated and the doji pattern suggests intense competition between the bears who want to take the EUR/USD lower and the bulls who see this region as an opportunity to buy in. I will not discount the possibility of an attempt to test 1.31 but caution is advised should the bulls manage to overcome.

Fundamental Analysis

We are currently facing a number of dovish aspects emerging from recent developments and hence the euro currency is probably facing selling pressure. The euro region GDP is expected to fall 0.3% this year. Unemployment is also expected to climb to 12.2%. Therefore the euro area is expected to shrink again, second year running.

While German confidence remains high, the economic data remains weak and have yet to gain a sustained recovery. It was reported that Moody’s had downgraded United Kingdom’s AAA ratings due to weakness in it’s outlook. This will probably inflict weakness upon the euro currency.

It will be crucial to continue monitoring the resolution of this downgrade. Furthermore the Italian elections are due today and hence be careful of any unexpected movement. Forex gaps are always a possibility due to changed expectations.

Trade safely.

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