Wednesday, June 6, 2012
During today's webinar, we discussed the outcome of the ECB's Monetary Policy decision and its effect on the EUR/USD pair. For most of the trading session, the common currency rallied across multiple crosses on expectation that President Mario Draghi & the ECB would cut interest rates as a means to deal with the sluggish & poor data coming out of the Eurozone. However, the ECB decided to leave rates unchanged at 1.00%, which resulted in a sharp drop in the pair. Mario Draghi mentioned that some of the issues with the Eurozone Sovereigns have nothing to do with monetary policy, but really a lack of action among EU policy makers to get their structural & fiscal house in order. So, this unexpected move to leave rates unchanged, caused the EUR/USD to slide & it pared most of its gains prior to the New York Open.
Although the ECB decided to take no action to ease markets & provide stimulus, the price of EUR/USD still managed to rally during most of the US Trading Session. For the past few days, EU Policymakers have been discussing the likelihood of a fiscal union or fiscal integration since the issues coming out of the Spanish Banking Sector have opened the door towards setting up a possible euro-wide banking union. This banking union would be used to help recapitalize the Spanish Banks & any troubled bank in the Eurozone.
There are also discussions among Central Banks around the world of some coordinated effort to provide liquidity in an attempt to stimulate the global economy. China has decided to cut their reserve ratio requirement, which would stimulate growth in their economy. This news had restored investor confidence for the immediate term and has caused risk appetite to be the final tone for the day.
Tuesday, June 5, 2012
The month of June opened with a brief recovery in the EUR/USD currency pair, but we are now witnessing a sharp decline due to concerns over the Spanish Banking Crisis. G7 Finance Ministers met for a teleconference call to discuss possible solutions to issues in Spain & Greece, as well as how to support the banking sector in case of a Greek exit from the eurozone. The EUR/USD fell 132 pips from the session high at 1.2542 to the session low at 1.2410, where price found support for the day.
In today's technical analysis video, we will briefly explain the price action in the EUR/USD pair and identify common areas of support & resistance for potential trade entries.