Good day to you.
It seems that as the overall rainfall and snow continued in Europe, currency markets are also affected! America dollars over the last three weeks failed to continue climbing despite the fact that buyers want to ensure the continued strengthening of the currency. This week was once again a focused week on state government bonds of Europe. Following the release of positive data in Asian countries, stock indexes of the region strengthened and probably flowed over to Europe causing the indication of increased risk appetite in the equities market.
The news remains bad in Europe as S&P reviews the rating of Portugal. A possible downgrade may bring more risk aversion to the markets as investors are very much concerned about the Euro Zone.
Mr. Trichet spoke of the ECB continued moves of bonds purchase to prevent acute tension to the market. ECB also announced that Ireland and Portugal bonds are bought. While this caused an initial dip of the Euro value, things quickly pick up as investors felt relieved.
Finally the much anticipated US Non-Farm Payroll came last Friday and the number of jobs created in America was much less than what was expected. As soon as the data was announced, the US Dollar was sold in favor of high yielding currencies. I personally believe that the issue concerning currency movements is not of whether is there risk appetite or not. Observing the equities markets indicates continued demand and hence suggests that overall there is no lack of risk appetite. It is probably more of a shift of funds by investors between the Euro and US Dollar depending on the market conditions.
In this month's US NFP, America's unemployment rate rose to 9.8%. The increase in jobs is usually an indicator of the recovery of an economy from a recession. However with the current low number of jobs created, it seems that the economic growth is not optimal yet and hence we must wait another month to see if the economy improves.
Technical point of view: A pattern that is often observed is the continuation of the US NFP currency movement trend by investors in the Tokyo and London sessions on Monday. Therefore we may seen a bullish EUR/USD. As you can see above, the EUR/USD may be still within the descending channel but a high ceiling channel is broken. Note the "ladder" pattern of the currency pair.
Have a great weekend.
Masoud.
Masoud is a businessman and a Senior Forex Koala. Connect with him at our page on Facebook.
Related Forex Articles from the Koala Forex Training College.
- Risk aversion in the forex market
- Resistance and support lines are never a single pip
- US Non-Farm Payroll Dec 10 Review
