It is a nice cool wet weekend for me and i hope things are fine with you.
If you finished the week green with pips, well done and keep it up! If you did not, do not give up. Remember that forex is not a quick way to get rich. Proper money management and patience is vital.
In the previous review, we noted that the EUR/USD was locked in range between the region of 1.38 to 1.4. This was probably due to the uncertainty surrounding the speculated quantitative easing program by the US Feds. Whether risk appetite or risk aversion would merge victorious, everyone's guess was as good as every others'.
Looking at the EUR/USD chart above, we can see that the currency pair had made an attempt to break above the range.
The week started with a nasty surprise. A forex gap was seen and hopefully no one was caught by it. Manufacturing in the US was better than expected and sentiments in the US were good. On the contrary the cost to insure against the default of certain Euro Zone member countries rose, serving as a reminder that the Euro Zone crisis still threatens to disrupt the economy.
As we approached midweek, sentiments continued to pick up. The anticipation of the speculated quantitative easing program together with an interest rate hike by India and Australia spurred appetite for risk. As a result, the EUR/USD went above 1.4.
Finally the much awaited FOMC statement event came. The plan was 600 billion US Dollar worth and it was more than expected. The market delivered a bullish knee jerk reaction in response, sending the currency pair up over 1.42.
Towards the end of the week however, the Euro Zone Retail Sales and Germany Factory Orders came in negative. This probably rained on the optimism parade and sent the EUR/USD back down to reality. The week ended with the important US Non-Farm Payroll and it was much better than expected. The outcome was an increase in the value of the US Dollar, sending the EUR/USD down towards 1.4. Investors probably decided that the US economy might be picking up and wanted a piece of the action.
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The currency pair closed above 1.4 and that suggests that the bullish momentum may not be over. Many economists believe that the quantitative easing program may inevitably weaken the US Dollar due to the influx of new money.
It was reported that Germany and China have expressed concerns over the $600 billion US Dollar plan. As it will probably weaken the US Dollar, other countries' currencies will rise in value if that happens and hence that will hurt their exports. There are economists that believe that quantitative easing will not help to stimulate the US economy and may in a worse scenario even spark a currency war between countries due to the need to devalue currencies for competitiveness.
A number of big name investment firms are echoing that the US Fed quantitative easing program will probably encourage optimism for sometime. Global equities and commodities will probably stand to gain.
I mentioned previously that the Euro Zone seems to be a little shaky these days. Do pay close attention to this region as any fallout will probably have far reaching consequences. Even though Greece has received assistance regarding it's budget deficit, a number of investors still believe that the fundamentals of the country are doomed for eventual default.
Over the next week, we have various important economic events such as the US Trade Balance and the German Preliminary GDP. These will give us an insight into the fundamental aspects of the respective economy. You can find the list of the various economic releases in the Economic Calender below.
From a technical point of view, as long as 1.4 holds, we will probably see more bullish momentum.
Trade Safely.
Related Forex Articles from the Koala Forex Training College.
Read more about the EUR/USD at my buddies' great blogs.
Forex Crunch writes a weekly EUR/USD outlook. It is a very popular write up and he is one of the best.
Winners Edge Trading with his great technical analysis brings about much knowledge to learn.
