Good day to you.
Estonia became the seventeenth nation to adopt the single currency Euro. Based on GDP from the end, Estonia is the second (after the small country of Malta). Sarkozy also declared in a speech: “The end of the euro would be the end of Europe”.
In America, positive and almost strong construction spending and the index of ISM was announced. It was in line with market forecasts and it bolstered speculation and restore confidence in a global economic growth in 2011. This probably enhanced the willingness to invest in higher yield assets.
Due to the fear of the Euro Zone Deficit Crisis, bonds rose in Europe and a weakened flow of risk appetite in the financial markets was seen. Low volume of liquidity in the currency exchange market is still visible but we have experienced some volatility in recent days. However this is expected to gradually become more relaxed. Having said so it is probably better to enter into trades only after when rational and orderly patterns return.
Last night the minutes of the previous meeting of the Monetary Policy Committee of the United States Federal Reserve (FOMC) was released. Fed officials said that the recent economic gains have not been enough to buy back the assets and the Fed policymakers believe that economic improvements achieved has not reached pre-specified thresholds. Therefore previous quantitative easing plans to buy 600 billion dollars in bonds so as to help reduce unemployment and the economy in general will continue.
The Fed said that while the economic outlook is improving, the members believe that this perspective is not enough and does not guarantee enough to make any amendments to the quantitative easing policy.
Today in Europe, Portugal 6-month bond auctions are held and certainly the market will be attracted. In the remaining days of the week, the private sector employment (ADP), the monthly employment report (NFP) and the speech by Mr. Bernanke will probably bring apprehension and risk aversion as investors await to review the economic conditions of America.
Technical point of view: Yesterday the EUR/USD in Time frame H1 formed a double top and today the EURUSD broke the neck line. Hence there is a possibility that the currency pair may fall to 1.3080. If the resistance 1.3080 is broken, the goal would be 1.2950.
Have a nice time.
Masoud.
Masoud is a businessman and a Senior Forex Koala. Connect with him at our page on Facebook.
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