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EUR/USD Forex Forecast Weekly Review 22 Jan 12

Good day forex traders.

Do you think the Euro Zone budget deficit crisis will end in 2012? Regardless, i sometimes wonder how can a country spend until it is in danger of becoming default. We are talking about an entire country! Oh my..

In the previous weekly EUR/USD forex forecast, we noted that the SMA 20 had been acting as an immediate resistance. As long as the currency pair remained below it, we could expect continued bearish momentum. The credit rating cut by S&P came along and Germany remained as the only Euro Zone country left with triple A ratings.

Technical Analysis

Looking at the EUR/USD daily chart above, we noted that the SMA 20 failed as a resistance eventually and the extended target of 1.3 was tested. I LOVE IT WHEN MY CHARTS WORK !

SMA 20 = Bearish
SMA 50 = Bearish

As far as the SMAs are concerned, we are still having bearish possibilities. However do pay close attention to 1.3 – 1.31.  If the currency pair goes above the SMA 50, a change of trend may be happening.

Fundamental Analysis

The S&P downgrade was probably priced in by the markets and hence it had little apparent impact. The French bond auction received strong sales and this was a positive sign. In another auction, Spain sold more long term debt than expected and this was seen as an apparent pass of a test of market sentiments. In the meanwhile the credit rating of the European Union remains at AAA as mentioned by S&P although the outlook is negative. 

The latest draft of an European Union fiscal pact will be discussed tomorrow as European Union leaders work together to push the union towards greater spending discipline. It is hoped that better deficit control rules will improve the credibility of the euro area.

From an equities point of view, both the US and the European Union continue to see positive gains as sentiments improve. Risk appetite is present.

Many important economic data such as the German Ifo Business Climate and US Federal Funds Rate is due this coming week. Monitor the results to get a snapshot of the various economies health.

Trade safely.

Related Forex Articles from the Koala Forex Training College.

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