Good day forex traders.
Second week of 2012 is upon us and i believe the low liquidity and low volume conditions would be gone soon. How are you gearing up for a fantastic 2012? 🙂
In the previous EUR/USD weekly review we noted that both SMAs were bearish and this suggested a strong possibility of a bearish momentum. Furthermore the SMA 200 which is an indicator for possible long term trend was bearish too. We note that the SMA 20 was functioning as an immediate resistance of sorts and any possible change of trend would need to see this resistance broken first. Fundamentally, the outlook for the Euro zone was not looking good. The various euro zone governments were rushing to implement austerity measures, sentiment had yet to benefit from a viable concrete solution to the problem. On the other hand, the US economy was looking rosier and recovery appeared to be gaining momentum with the recent economic data.
Looking at the EUR/USD Daily chart above, we note that the SMA 20 continues to function as a resistance. I LOVE IT WHEN MY CHART WORKS !
SMA 20 = Bearish
SMA 50 = Bearish
The SMAs including the long term SMA 200 suggest that the possibility of ongoing bearish momentum is strong. I mentioned in my previous review and facebook that the EUR/USD might end around 1.2720 due to my historical support and resistance analysis and it did! HA! I LOVE IT WHEN MY CHART WORKS! Ok enough of proud out blasts for the day 😛
With a closure of the currency pair below 1.28, we may be looking at 1.26 next. Having said so, fundamental considerations must be applied and hence it is important that one plays close attention to both technical and fundamental developments when trading.
The outlook for the Euro Zone remains poor. It was reported that the German factory orders fell the most in almost three years in November. It is widely believed that the euro-region economy is edging toward a recession and global demand is weakening. Furthermore many debts will be due in 2012 for the region. We may be expecting stormy economic conditions there.
The US Non-Farm Payroll came in on Friday much better than expected. The US Unemployment Rate has fallen to 8.5% and this is causing sentiments to be positive towards the US economy. Consumer confidence is high and export orders are rising.
A continued development of the relationship between these two economies, ie the US being rosier than the Euro Zone, may see currency demands shifting towards the US Dollar not for only risk aversion, but also for businesses.
As usual, there are many important economic data due next week such as the US retail sales and Euro Zone minimum bid rate and hence trade safely.
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