Good day traders!

We have the euro dollar today dropping from 1.34209 in early Australian trade to 1.3247 as of now 11.56 Singapore time and also during the US open. The drop is nearly 200 pips and are we going to see the resumption of the risk aversion this week or better market sentiments that would allow us to see risk currencies going up as we go forward towards new year.Euro dollar analysis on Singapore Forex Blog

Do take note however that the euro dollar have dropped for the first time after going up last week for the last 4 days. Again we see that the reason given was that of the euro zone woes. The interesting thing is that the weak performance of the euro came ahead of the meeting of euro zone finance ministers who are under the pressure to boost the size of a rescue fund to halt the debt crisis from spreading wider to the financial markets and prevent global recovery. The IMF chief Dominique Strauss-Kahn will be presenting a report during the meeting which would be held in Brussels indicating to all members states that more action is needed in order to halt the Euro debt crisis.

With the uncertainty from the meeting at hand, traders have decided to take the safer approach of selling the euro dollar. The focus for euro dollar traders would be political developments and the commitment from the euro zone policy makers.  The IMF report states that there should be an increase in the size of the 750 billion euro rescue fund and there are also calls for the European central bank to be involved in more bond buying.

Bernanke came along and made a statement that should have strengthened the euro. He said on CBS TV late Sunday that US monetary policy makers migt increase the additional $600 billion in asset purchases. More asset purchases should have impacted negatively on the dollar but his comment went numb and the market reacted the opposite way and strengthened the dollar instead. The reason for this could be attributed to the weakness that we see in the euro zone and the euro.

It should be noted that the reversal in euro dollar is further supported by the fact that the risk premiums to buy euro puts increased over calls as the rally in the euro dollar looks to have run its course.

Based on the charts, we can see that the euro dollar is in a tight triangle and is currently consolidating at the 1.33 levels. A break below 1.325 could signal further bearish momentum and we should be looking at the pair going beyond 1.34 to signal a bullish move towards 1.35. At the moment, the uncertainties surrounding the pair is causing the pair to consolidate further.

I am not taking any trade at the moment due to the uncertainties I mentioned above. I would take the occasional scalping trades but no swing or mid term trades for now.

To your trading success!

~ Ardy

Singapore Forex Blog