Good day forex traders.
Welcome to our weekly review of the EUR/USD currency pair.
The US presidential election came and went. We were aware of the possible volatility. At times it would be prudent to be uncommitted to any position. Remember that the market will always be there for us.
Looking at the EUR/USD weekly chart above we note that the currency pair had a large range for the week due to volatility. It tested the top bollinger band before easing down. I remain pleased with the performance of the bollinger bands.
Many traders wanted to capitalise on the momentum and entered long positions. Losses might be bad when the currency pair reversed and broke below the bottom bollinger band.
A number of readers wrote in to inform that they suffered from the reversal. They didn’t understand why is the US dollar rising.
Here are two reasons out of the countless possible.
One school of thought would be risk aversion. The US dollar is believed to be one of the safest monetary instrument during times of uncertainty.
The another reason could be due to Donald Trump’s policy stance. He is seen as a go to person to make America great again. Having shown his American First policies etc, traders may be keen to jump onto the perceived band wagon.
Over in the Euro Zone, things are not as expected. The union continues to be plagued by the weaker economies. Take a look at this BBC interview-
“A founding father of monetary union has given a damning assessment of the euro bloc, saying that not incorporating an exit strategy was a mistake.
Prof Otmar Issing told the BBC’s Wake up to Money that faultlines across the eurozone remain, citing economic weakness in Greece, Portugal and Italy.
The European Central Bank’s first chief economist also warned about the impact of negative interest rates.
And he said political pressures threatened central banks’ independence.
Prof Issing told the BBC that structural problems in the eurozone and dwindling public support in some countries were still major problems.
The euro currency was “stable and performing much better than expected”, he said. “But I wish I could say the same about the euro area.”
Countries that tipped the bloc into recession during the global financial meltdown were still in serious economic trouble. Greece was in “permanent crisis”, and economic reforms in Portugal and Italy were either on hold or being reversed, the professor said. ”
Next week brings important events. Early week gives us a speech by ECB President Draghi. Core data like US Retail Sales are scheduled to be released in the later part of the week.