Good day Koalas.
Welcome to the EUR/USD weekly review and i hope your weekend is great so far.
In the previous weekly review, i mentioned that we should be on the lookout for any negative developments from Greece. A lack of media coverage did not mean that the problem is solved. With the complications surrounding the solution for the Greece deficit crisis, it will go beyond a simple fix.
This week saw bearish action overwhelming the support lines. After a failed attempt to break above the strong resistance line of 1.3800, the price slices through all support to end the week at 1.3530+.
This move caught many by surprise. As the currency pair was testing 1.3800, many presumed that it was an indication of bullish momentum. Unfortunately, we can never achieve a 100% prediction for forex and this served as a nasty reminder for many.
The main reason for this bearish drop? Probably Greece oh Greece.
As the markets look forward to a speedy and concrete resolution to the Greek deficit crisis, the leaders of the European Union began to show differences in their opinions of a resolution. The markets are taking this badly. A tricky problem such as Greece’s needs cohesion and time is running out.
Germany is calling for an IMF solution to the Greek crisis. This raised questions and brought about uncertainties as investors wonder how much of a commitment is Greece getting exactly with regards to a solution.
France on the other hand believes that a EU solution is possible. An IMF loan may suggest the inability of the European Union to solve it’s own problem and lead to a confidence fall out. Investor confidence is crucial and the French seems to believe that a swift and proper solution from the European Union may be an answer.
Whichever the solution, time is running out for Greece as it faces a 20 billion Euro of debt redemption in the next two months.
Across the Atlantic, things are apparently looking well. The S&P 500 made a recent high despite the negative sentiments flowing out of the Euro Union. Investors feel that the US is making good progress in the recovery and hence somewhat shielded from the Greek crisis. That may not be the case as the market is indeed a global market. The financial crisis of 2008 is a good example of how it all began in the US and spread worldwide eventually.
I was doing some research on the “real deal” behind this US bullish party and i will like to share with you this report. Remember i mentioned sometime back that commercial real estates may be the next time bomb?
Guess what? Perhaps. Perhaps. Perhaps.
7 US banks were seized on Friday bringing the total to 37 this year. It was reported that the banks took on excessive risks in the loans that they gave to commercial real estate, etc and were facing mounting defaults.
The FDIC Chairman warned that the number of bank failures may exceed last year’s total of 140 as the lenders are collapsing at the fastest rate in 17 years due to losses on residential and commercial real estate loans made at during the boom of the market.
Objectively, if one were to dig into factual information, a side of the US economy you never knew will be revealed. Unemployment at 9.7%. Suffering home sales. The list goes on. As much as the facts are, the beauty of the market is that it is often based on sentiments rather than facts.
Next week brings us numerous critical economic data such as both new and existing home sales, Unemployment Claims and the Fed Chairman testifying on the US side. Over at the Euro Zone, we have important releases such as the German Ifo Business Climate. You can find the list of the various economic releases in the Economic Calender below.
We were blessed enough to have the currency pair “adhering” to our range of 1.35-1.39. With the current negative sentiments, we may be looking at 1.34-1.38. However we need to pay close attention to 1.3455+. Should this support fail, we may be subjected to a new range of downside.
Remember though, resistance and support lines are never a single pip.
Keep a look out on developments that may trigger risk aversion.
Trade safely and do plan your trades well.
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