Uncertainty in the global economy. EURUSD testing critical support level in the daily time frame
10 months ago forexsimulation 0
The recent ongoing economic crisis has been furthermore intensified due to the pending interest rate decision by the FED. From the very beginning of the year 2016 retail forex traders was favoring the green bucks since an imminent rate hike from the FED was anticipated. But the U.S economy failed to support the investors sentiment as the major economic news releases came out pretty bad in the first half of the year 2016.Moreover, this year has been extremely important for the forex traders since lots of economic and political event was scheduled in this year. The recent U.S presidential election had an unexpected result which boosted the green bucks to a great extent in the forex market. Moreover the average hourly income and Nonfarm payroll data has been extremely good in the last couple of months which strongly favors the rate hike decision in the month of December during the FOMC meeting minutes. However investors are overly cautious about their next move since Mr. Trump had an anti-social tendency which might weaken the green bucks in the near term future to a great extent. The green bucks was supposed to get weaker on the Mr. Trump selection but surprisingly it gained strength against its all major rivals in the forex industry since Mr. Trump victory speech eased the mind of the investors. According to the FED rate hike monitor tools, there is 91.3% chance interest rate hike in the month of December. But leading economist suggest that a single rate hike might not be enough to bring economic stability in the country. They suggest that in order to secure balanced economy in the US another rate hike is required in the next year which is highly unlikely. Many investors states that there is less than 50% chance for the second rate hike by the FED.TO be precise the current strength of the green bucks is now in danger since we have lots of major economic events left.
The stock market reacted positively to the victory of Mr. Trump. Majority of the stocks traded on the New York Stock Exchange hit a record high on the event of the publication U.S next president. Most importantly Mr. Trump delivered an optimistic victory speech which strongly argues against his anti-social mentality. On the event of U.S prudential election investors have shifted huge amount of money from bonds to stocks for better security. Such a huge shifting in the money might create massive chaos in the forex and stock market for a prolonged period of time. Last week the green bucks has weaken to a certain extent against its major rivals. In the eyes of expert forex traders this might be an early indication that the currency market is ready to start a minor correction in the upcoming week. Though the dollar was weak against its all major rivals from Thursday but investors are in fear since the FED will most likely boost the dollar up gain in the market by raising their interest rate. If the FED hike their interest rate in the month of December with a hawkish statement then the ongoing economic crisis will be settled down to a great extent since the dollar will sustain its strength for a decent time. But most of the stock traders will have to wait for another rate hike by the FED in order to make smooth profit by trading the stock market. A single rate hike by the FED at the current market scenario is not enough to bring economic stability .However we can’t be sure about the next move of the green bucks since Mr. Trump might shake the whole world economy with his new innovative idea.
The dollar traded weaker against its major rivals in the forex industry on the last Friday. Currently the EURUSD pair has been testing the low of December 2015.If the critical support level at 1.0520 level holds then we might see a decent bullish correction in the EURUSD pair in the next week. In addition, the pair had very difficult time in the past staying in such low levels. If ECB president Mario Draghi comes out with QE Program then we might see a decent bullish run the EURUSD pair. But the current situation still remains strongly bearish for the EURUSD pair since the pending rate hike decision is most likely to come in favor of the green bucks. Most of the retail forex trader has been out of their short position at the current level and in the opening of the next week the large hedge firms and investors will also be out of their short entry in this pair. To be precise these level is going to act as profit taking level in the market. In next week opening ECB president Mario Draghi is going to deliver his speech at the press conference .Optimistic forex traders are expecting a hawking speech form Draghi in the press conference which will help the EURUSD pair to recover its losses to a certain extent. But considering all the parameters and fundamental factors the EURUSD pair has very limited scope to move in the upward direction. Those who are planning to go long in the EURUSD pair should be extremely cautious since the Nonfarm payroll news releases is scheduled in the next week. In other words the green bucks might regains its former glory against its all major rivals in the forex market if most the important news releases comes in favor of the U.S economy.