Sunday, May 11, 2014

Euro still in an uptrend | USD – Yen pair at an important support

Despite all the excitement last week after the European Central Bank (ECB) declarations that were interpreted as being the forerunner of strong easing measures in the Euro zone, which if implemented would tend to weaken the Single Currency, the EURUSD pair is still in an uptrend. Price is also still above the 200 Day Simple Moving Average (SMA), although 1.40 seems to have been established as being the upside resistance, at least for the time being.

The markets often come to rest at round numbers. There is no significance in a round number in mathematical terms, of course, but human psychology does create the illusion that there is.

USD – Yen pair at an important support

Meantime, the USDJPY pair has actually touched its 200 Day SMA, and apparently been bounced off it. A little bit more price movement will be needed to confirm if this is the case.

From the Fundamental Analysis point of view, it has been announced that the annual Japanese trade surplus has come in at its lowest reading since records began. This is both surprising and disappointing for a country that traditionally exports so much of its manufacturing output. There is even talk now of a slide towards a trade deficit, driven mainly by the need to purchase more fossil fuel from abroad as a consequence of the Fukashima nuclear disaster. On the other hand the balance of trade could have been affected by brought-forward consumer spending in advance of a new sales tax in Japan.

All of this might be of major importance for the value of the Japanese currency in the immediate future. This will particularly be the case if the energy situation in that country has brought about a structural change to the economy. 

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