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EUR/USD Weekly Review 11 Dec 11

Good day forex traders.

Christmas is coming soon. Are you excited? Would you be trading throughout the festive season or are you enjoying a holiday compliments of your forex profits? πŸ™‚

In the previous EUR/USD weekly review, we noted that the week was a bullish week. It closed around 1.34 which is historically an important region of support and resistance. The SMA 50 did not turn bearish and hence a sustained bearish momentum might not be a high possibility. Fundamentally the market sentiments were more positive due to developments of the Euro Zone budget deficit crisis. It was reported that there was a proposal to avail of funds from the central banks of Europe via the International Monetary Fund IMF to assist Euro Zone countries in need of funds. This was to enable a workaround of regulations regarding the providing of direct support from central banks in Europe to member countries. A drop in the latest US unemployment rate to 8.6% among other US developments resulted in better market conditions too.

Technical Analysis

The EUR/USD developed a slight bearish trend as it remained capped by the SMA 20. Nonetheless, the region of 1.34 remained very much in focus for the week as daily currency pair movements continued to touch it.

SMA 20 = Bearish
SMA 50 = Flat

With the SMA 50 still flat, one must consider that the direction of the EUR/USD probably still remains an uncertainty. Any strong bearish move will probably focus on the target of 1.32. I expect fundamental issues to continue to drive the immediate movements of the EUR/USD.

Fundamental Analysis

Talks at 20th anniversary of the Maastricht summit in Brussels were hailed as a major step in righting the crisis of the budget deficits in the Euro Zone. Euro area central banks will be providing about 150 billion euros together with around 50 billion euros from non-euro member nations for a total of 200 billion euros worth of aid to be channeled via the International Monetary Fund IMF. A permanent rescue fund known as the European Stability Mechanism ESM will be implemented in July 2012, a year ahead of schedule. This will consist of 500 billion euro of much needed financial aid. Germany’s campaign to involve private investors in taking write down losses which was speculated to be a cause of the worsening crisis and increasing bond interests, was abandoned.

Market sentiments probably remained positive as the S&P 500 equity index gained this week.

S&P earlier mentioned that it would be studying the implications of the summit before deciding on the possibility of rating cuts for 15 euro region nations. Germany is on the list. As this may affect sentiments, close monitoring should be done.

Trade safely.

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