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Good day koalas!

Yesterday, we saw the EUR/USD dip to the 1.3600s due to apparent risk aversion.

Investors were concerned when reports indicated a drop in foreign demand in US securities. Furthermore, there was apprehension towards any potential curbs to be taken by China and India with regards to their economic growth.

Looking at the EUR/USD, it is recovering from yesterday’s bear attack. It is currently testing the resistance of 1.3740.

On a similar note, the S&P 500 is once again bullish. Positive sentiment with regards to the US economy is apparently strong.

Oil is currently trading at $80+. This again suggests that the risk appetite is strong today.

Gold has risen to $1120+ at the moment.

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The EU moves closer to having a drawn up plan of aiding Greece in the event of the failure of deficit cutting measures implemented by the Greek government. While investors are probably happy to hear this, we have to look deeper into the situation.

I always believe that the Greek problem won’t be solved easily. Concerns will probably surface with regards to the setback of the Euro Zone’s economy if the aid is required. Furthermore there were different views in the discussion so far on how the aid will be implemented. April and May will probably be testing times as debt redemption of a total of more than 20 billion euros is due for Greece.

Another possible reason for the positive sentiment may be the German ZEW Economic Sentiment coming in slightly better than expected. Furthermore, US Building Permits and Housing Starts came out close to their estimates. Home Sales create much economic activities and hence investors often appreciate a stable or positive housing outlook.

A report stated that economic officials from the Obama administration said today that the unemployment rate will probably not go much lower than the current 9.7% due to the economic outlook. We know that jobs drive consumer spending which in turn drives the economy and hence this unemployment problem in US may be an anchor dragging the recovery.

Folks, Federal Fund Rates will be up next and hence do be careful. Even if nothing unexpected happens, investors will scan, read, magnify, speculate, worry, etc etc over the accompanying statement release and hence be careful!

Tomorrow brings us important news such as the US Producer Price Index as well. Stay focused, alert and plan your trades well.

Bullish momentum may bring us to 1.3800/80.

A bearish comeback may see 1.3680/00.

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Koalas! I added a site map for your convenience! You will find a list of articles i wrote over the year and more. Hopefully this will help in your navigation around TheGeekKnows.com .

I need to go meet Ms Sleep now. Feeling a little cold lately. I hope it is not the flu bug.

Trade Safely. ( Remember ! Add me on facebooook !! )

Read more Forex Articles and Views by The Koala at www.thegeekknows.com

GDP in the first quarter of 2010 will be lower than last quarter, but that’s a good thing according to an article written by Kathleen Madigan in The Wall Street Journal. The expected number is between 2% and 2.5% vs. the 5.7% recently seen.

Q4 2009 GDP was driven to a large degree by an inventory rebuild (3.88 percentage points of the 5.7% jump in GDP last quarter), something that doesn’t look to be repeated now. But that’s a good thing because the numbers will show that demand is leading the way, and that will be interpreted as evidence of sustained growth.

Core sales — a measure that goes directly into GDP calculations and which exclude autos, building materials, and gasoline — jumped 0.9%. The uptrend in core sales suggests real consumer spending is growing close to 2.5% this quarter, better than the 2% rate he was expecting before the February retail data were released, she writes.

The February data indicates that consumers are back. And even though the headline number will be lower, the number will look better because final demand creates a more sustainable recovery due to increased spending that will start the cycle of more orders, production and hiring, leading to more spending.

China-There’s Nothing To Fear But Fear itself

Nobel prize-winning economist and New York Times columnist Paul Krugman says that the U.S. has no reason to fear China.

“What you have to ask is, what would happen if China tried to sell a large share of its U.S. assets? Would interest rates soar? Short-term U.S. interest rates wouldn’t change: they’re being kept near zero by the Fed, which won’t raise rates until the unemployment rate comes down. Long-term rates might rise slightly, but they’re mainly determined by market expectations of future short-term rates. Also, the Fed could offset any interest-rate impact of a Chinese pullback by expanding its own purchases of long-term bonds.

It’s true that if China dumped its U.S. assets the value of the dollar would fall against other major currencies, such as the euro. But that would be a good thing for the United States, since it would make our goods more competitive and reduce our trade deficit. On the other hand, it would be a bad thing for China, which would suffer large losses on its dollar holdings. In short, right now America has China over a barrel, not the other way around. So we have no reason to fear China.”

It all comes back to that famous quote by economist John Maynard Keynes: “Owe your banker £1,000 and you are at his mercy; owe him £1 million and the position is reversed.”

China’s position as the largest foreign holder of U.S. debt means that if they were to dump their holdings, their price will necessarily decline, thus imposing a potentially large capital loss on themselves.

The fear is that if the Chinese stop buying our bonds it will raise interest rates on Treasury securities. That’s probably why the Treasury never presses the Chinese too hard on this issue. However, economist Gary Burtless of the Brookings Institution believes that the increase in U.S. growth resulting from a decline in the trade deficit, which subtracts from GDP, would more than compensate for the increase in interest rates.

According to former Treasury Department economist Bruce Bartiett, “As long as the U.S. national debt is entirely denominated in dollars, there is no risk that we will run into the sort of financial crisis that small countries often run into. What gets them into trouble isn’t the debt per se, but an inability to acquire sufficient foreign exchange with their own currency to service it. While the U.S. Treasury has never issued bonds denominated in foreign currencies, it is conceivable that it could be forced to do so if the dollar falls sharply and foreign demand for U.S. bonds wanes. That will be the point at which our debt problem becomes more than theoretical and we are really on the road to national bankruptcy.”

EURUSD Forecast:
The EURUSD failed to continue its bullish momentum yesterday, bottomed at 1.3640 and closed at 1.3674 after bad US TIC long term purchases number triggered risk aversion. This fact leads me to a no trading zone in nearest term as direction is unclear but the bullish reversal scenario triggered by the triple bottom formation should remain intact as long as price still move inside the bullish channel with technical bullish target at least at 1.3850. We will have ZEW economic sentiment and CPI number from the Euro zone which is expected to be the catalyst today. Good result should trigger further upside momentum and keep the bullish scenario intact while bad result should trigger significant bearish momentum and potential threat to the bullish outlook testing 1.3530 support area.

EURJPY Forecast
The EURJPY failed to continue its bullish momentum yesterday, bottomed at 123.32 and closed at 123.72. The bias is bearish in nearest term but the bullish scenario should remain intact as long as price still move inside the bullish channel. A violation to the bearish channel and a break below 123.00 area should be seen as bullish failure and trigger further bearish momentum targeting 121.70 area. Immediate resistance at 124.20 area. Break above that area should trigger further upside momentum re-testing 125.15 area and keep the bullish scenario intact.

GBPJPY Forecast
The GBPJPY failed to continue its bullish momentum yesterday, bottomed at 135.80 and closed at 136.17. The bias is bearish in nearest term but as long as price move inside the bullish channel the bullish scenario remains intact. A violation to the bullish channel should be seen as bullish failure and could trigger further bearish scenario re-testing 132.50/00 area. Immediate resistance at 136.50 area. Break above that area could trigger further upside momentum testing 138.30 area and keep the bullish scenario intact.

AUDUSD Forecast
The AUDUSD attempted to push lower yesterday, bottomed at 0.9095 but closed higher at 0.9136. The bias is neutral in nearest term. The bearish correction scenario triggered by the double top formation remains intact but the major bullish outlook remains valid as long as price stay above the major trendline support (red) but we need a clear break above 0.9190 area to continue the bullish scenario targeting 0.9250 and 0.9326 area. Immediate support at 0.9100 followed by 0.9040.

GBPUSD Forecast:
The GBPUSD failed to continue its bullish momentum yesterday, bottomed at 1.5019 and closed at 1.5049. This fact should keep the major bearish scenario intact especially if price break below 1.5000 – 1.4950 today targeting 1.4873 even 1.4779 area. Immediate resistance at 1.5120. Break above that area should trigger further upside momentum testing 1.5200/50 area and re-testing the upper line of the bearish channel.

USDJPY Forecast:
The USDJPY didn’t make significant movement yesterday, but price fails to stay above 90.50 area indicating that bullish run starts to lose some momentum and at the same time the minor bullish channel has been violated to the upside indicating bullish failure. The bias is bearish in nearest term targeting 89.50 area. Another movement above 90.50 could lead us into no trading zone as direction would become unclear.

USDCHF Forecast
The USDCHF failed to continue its bearish momentum yesterday but still manage to move below 1.0640 area. The bias is neutral in nearest term but the bearish correction scenario should remains intact with technical target at 1.0507. Another move above 1.0640 could be a serious threat to the bearish correction scenario testing 1.0720 even 1.0888 area.

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Good Monday Koalas!

Blues getting to you? Kicking dirt into your eyes?

Get angry you dont! Take a deep breath and face the challenge! Life goes on

Yes, you know where this is going to. The EUR/USD is having a bluish Monday of it’s own too. Let us take a look at the current price action.

After testing the strong line of 1.38 last Friday, the EUR/USD took a dive and is currently testing the 1.3680 support. Altogether now, ” We love it when the koala’s chart works.” YES! Nothing beats shameless self praise on a Monday.

On a similar note, the S&P 500 takes a break from a bullish ascend and is heading towards 1140.

Oil drops to $77+. This may indicate that the anticipated recovery may not be here yet as oil can be a clue to the global economy’s health.

Gold remains unaffected at around $1103+. Demand for gold may be holding it steady. As gold is an investment of choice when it comes to stormy financial weather, risk aversion may be present.

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The TIC Long-Term Purchases report came out much lower than expected today. This report measures the difference between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners and hence it is an indication of foreign demand for US securities.

As the actual data is much lower than expected, risk aversion may be happening as investors seek to make sense of this sharp drop of overseas demand for US securities. Two biggest holders of the US treasuries, China and Japan, reduced their holdings. This is contrary to the positive belief of the pace of recovery for the US economy.

Next up, investors are also concerned with regards to China and now India. These economy giants are sizzling with growth and investors fear of a curb of growth to contain inflation. Furthermore, it is greatly believe that these giants spur the global recovery on and hence any premature curb in growth may extinguish the fragile recovery.

A report i saw today gave me quite a bit to think about. Moody’s Investors Service said that the US and UK are “substantially” closer to losing their AAA credit ratings. This is considering the fact that both nations are spending about 7 percent of the year’s revenue on debt servicing. Keep a look out for this and remember you heard it first here at TheGeekKnows.com ( Unless you read the report yourself too )

Tomorrow brings us a number of economic releases including the important German ZEW Economic Sentiment and the US Building Permits. Be careful of unexpected spikes.

Bullish relief may bring us to 1.3740/800.

Further bearish developments may test the support of 1.3600/550.

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Woah, a koala recently asked me” With all this articles that you are churning out, how can you manage time? How can you trade?” YES I CAN! When a “chore” is a passion, the meaning of chore disappears. I love writing articles and reviews for koalas. Every time when you send me an email or facebook message to say thanks, i am beaming with a smile

Surely the time must have came from somewhere right? Yap indeed. My issues with Ms Sleep are getting worst. We only spent 4 hours yesterday together.

Gtg! Trade Safely ( Remember ! Add me on facebooook !! )

Read more Forex Articles and Views by The Koala at www.thegeekknows.com

EURUSD Forecast:
The EURUSD had a significant technical movement on Friday by break above the major bearish channel, confirms the bullish reversal scenario after formed triple bottom formation around 1.3450/35 area. While technical outlook is bullish in nearest term targeting 1.3850 before aim for 1.4025/50 region, on fundamental side Euro is supported by rising risk appetite but note that the we have not seen convincing solution on Greek debt crisis so actually the fundamental foundation for Euro bullishness remains fragile and any negative news from the Euro zone or the US could weigh on the Euro and be a potential threat to the technical bullish view as risk aversion could increase and give advantage to the Dollar. Immediate support at 1.3700. Break below that area should be seen as a serious threat to the bullish scenario testing 1.3550/30 area.

EURJPY Forecast
The EURJPY attempted to push higher on Friday, topped at 125.19 but closed lower at 124.47. The bullish scenario after touched the double bottom around 119.70 area remains intact but we need a consistent move above 125.15 resistance area to continue further bullish momentum targeting 126.90 area. The bias is neutral in nearest term. Immediate support at 124.00. Break below that area could trigger further bearish momentum targeting 123.00.

GBPJPY Forecast
The GBPJPY had a moderate bullish momentum on Friday. On h4 chart below we can see that price is moving inside a bullish channel after bottomed at 132.00/50 area indicating bullish correction phase but still in the context of a major bearish scenario.  The bias is neutral in nearest term but bullish correction scenario at least targeting 138.30 area remains intact. Break above that area should trigger further bullish momentum targeting 141.40 area. Immediate support at 137.00 followed by 136.10.

AUDUSD Forecast
The AUDUSD made another indecisive movement on Friday, made another Doji on daily chart. On h1 chart below we have a double top formation after bullish rally from 0.8982 area indicating potential downside reversal scenario as bullish momentum wanes. The bias is bearish in nearest term targeting 0.9040 area but the major bullish scenario remains intact so I still prefer a bullish scenario with buy on dips strategy. Initial resistance at 0.9138 (double top). Break above that area should trigger further bullish momentum targeting 0.9250 and 0.9326 region.