Good day to you!
We had a week full of economic news, reports and conferences. The most important news was the US NFP on Friday.
As I said a week ago, important highlights for most traders would be Bernanke comments and certain important economic data. This week we witnessed the announcement of positive economic news and pressure to the market on the upside emerged. Despite negative news later on, the market tendency for loses was not strong. Perhaps due to the fact that a week ago, Bernanke had no need to inject more liquidity.
When three goals in the economy (GDP positive and high, high inflation and controlled, low unemployment) exist, policies for contraction begin. This was for Australia and during this period, the interest rate reached 4.5. This week, the GDP in Australia had a good and unexpected announcement. As the majority of the market is concerned with the world economy slowdown, such news bring about much positivity. Manufacturing in China increased too, adding on to the rise of the high yield currencies.
It is interesting that the world economy is now looking to China despite the apparent lack of transparency in the statistics and the uncertainties. Speculative bubbles may exist in China but the market fails to address it for now, remaining narrow sighted towards the economic growth.
In this week's conference, Mr Trichet said: "Europe Central Bank forecasts economic growth in Europe, has seen an increase, rising inflation seen in Europe, will moderate expansionary policies, as well as past credit growth remains stable" Trichet also said: "again will be not be recession."
The tone of Mr. Trichet did not differ much from Mr. Bernanke. Perhaps they met at the Jackson Hole conference and had influenced each other. LOL
Currently the problems Europe faces is probably less than the US. This may provide more opportunities for the ECB in terms of monetary policies adjustments.
This week the US and Canadian Labor Day on Monday is a bank holiday. Whether the Germany economy continues to improve will probably affect the value of the Euro. Statistics regarding the US trade balance and the major economies like China and Europe will be released this week.
After the release of economic news last week including the better than expected NFP, risk aversion probably lessen. However caution is advised, and statements from the Federal Reserve should be monitored. If continued positive news this week causes the equities markets to rise, we may see a corresponding rise in the high yield currencies.
From a technical point of view you can see in the picture below, the market may range between 1.2730 and 1.3 but there are two scenarios:
Scenario One: If Euro can break the main resistance of 1.30 and break the Daily Trend Line1 and Daily Trend line2 line, probably the next target will be 1.36.
Scenario Two: After dealing with price resistance at 1.30 and descends, it may range down to 1.2820 / 1.2850 and perhaps attempt at another attack at 1.3
Have a great weekend.
Masoud.
Masoud is a businessman and a Senior Forex Koala. Connect with him at our page on Facebook.
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