EUR/USD: Making Strides from the Bottom

By: Andrei Tratseuski- Forex Club

After the ECB opted to maintain the interest rates at bay of 100 basis points, the EUR/USD continued to put a clinic of how to turnaround from a gut wrenching downtrend. Currently, the EUR/USD pair is showing a bottom in place, and if markets continue to remain calm, the pair will likely to rise in a foreseeable future. Current support which should be maintained is a psychologically important 1.20 level. With a bottom in place for at least now, the pair will likely to inch upwards as both technical analysis and fundamentals are painting a picture of advances.



The ECB stated that the economy will grow at a span of 0.8% to 1.3%, with 1% being a medium threshold, revising previous projections of 0.8%. Predictions call for interest rates only to be raised in mid-2011, however, any deviation from having a quantitative easing program will be portrayed as positive amid sovereign debt concerns throughout the whole Union. So far the ECB has been active in the markets buying as much as €56.3 Billion sovereign notes since Wednesday. Any deviation from buying out debt will be reflected positive for multi-national currency.

Risk appetite is playing a key role in the markets. Since April of this year, the S&P 500 and EUR/USD had a correlation of roughly 86.57%. What does that mean for you? Well, when markets are feeling optimistic about performance, higher beta currencies, this includes Euro, and the stock market in the US tend to perform better. Therefore, optimism will drive both US equities and the Euro to the higher grounds.



Technically speaking, the EUR/USD has a lot to cover before it hits a key resistance level. The forthcoming resistance lies at 1.2200, a high reached yesterday. Support is currently structured at 1.2000, a psychologically important level.

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