FOREXYARD: Forex News Blog

Link to Forex Trading Education : Forex Trading Blog by FOREXYARD

Ireland’s Resistance to Bailout Pushing EUR/USD towards 1.3500

Posted: 15 Nov 2010 04:47 AM PST

Ireland's insistence to resist taking funds from the European Financial Stability Facility over the weekend has stirred the euro in today's trading. While the US dollar has been gaining against its rivals due to European instability and a recent wave of quantitative easing (QE2), this sovereign debt issue now facing the euro zone has caused a few setbacks in euro trading.

The concern is over the widening of yield spreads for euro zone debtors – mainly Spain and Portugal. If Ireland refuses to take funds, it risks allowing these yield spreads to widen further, putting additional strain on the already-struggling Spanish and Portuguese economies. If Ireland, does take the funds, however, it allows itself to become further indebted in a time of crisis.

Not taking part, it seems, would be beneficial for Ireland, but allowing the European Facility to bail its institutions out would diminish some of the pressure which has been mounting throughout the region.

Countries like Germany, to say nothing of Spain and Portugal, would like to see Ireland get bailed out for a number of reasons, including that mentioned above. But also because Germany would like to see the Facility become a more permanent feature of the European financial system. Such a safety net would allow more flexibility and less uncertainty during times of crisis.

Since the start of these recent debt concerns, we've seen the EUR plummet against its primary counterpart – the USD – from a high of 1.4281 to its current price, over 600 pips lower, near the 1.3625 level. We can see in the chart below that a significant psychological barrier is approaching at the 1.3500 price level. Should it breach this region, we could see a wave of profit-taking push the pair lower in the short-run, with a potential target near 1.3350, and room for additional bearishness.

EUR/USD – Daily Chart
EURUSD - Daily Chart

Buy Signals on AUD/USD

Posted: 15 Nov 2010 12:05 AM PST

The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, as I demonstrate below, the 8-hour chart signals that a bullish reversal is imminent. Forex traders have the opportunity to wait for the upward breach on the hourlies and go long in order to ride out the impending wave.

• Below is the 8-hour chart of the AUD/USD currency pair.

• The technical indicators used are the Slow Stochastic, MACD, and Relative Strength Index (RSI).

• Point 1: The Slow Stochastic indicates a bullish cross, signaling that the next move may be in an upward direction.

• Point 2: The Relative Strength Index (RSI) signals that the price of this pair currently floats in the over-sold territory, indicating upward pressure.

• Point 4: The MACD indicates an impending bullish cross, which may signal an upward movement is going to occur in the near future.

AUD/USD 8-Hour Chart
AUD-USD 15-11-2010