EURUSD Poised to Test 50-Day SMA as Bullish Trend Remains Intact

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/top_fx_headlines/2011/01/03/EURUSD_Poised_to_Test_50-Day_SMA_as_Bullish_Trend_Remains_Intact.html

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Fundamental Headlines

• Investors Forecast: Sunny With Chance of Overheating – Wall Street Journal

•Big Firms Poised to Spend Again – Wall Street Journal

• Asian Markets Get off to Strong Start - Financial Times

•Stocks Rally, Dollar Strengthens on Economic Outlook- Bloomberg

•China’s Inflation May Cool With Factory Slowdown - Bloomberg

EURUSD: The final Euro-zone PMI manufacturing report jumped to 57.1 in December amid expectations of 56.8 to mark the highest level since April 2010. Indeed, the euro lost ground during the overnight trade as traders return to their desks; however, the selloff was short-lived as the euro reversed course at the overnight low of 1.3249. This past week, Estonia joined the euro, and will be the second smallest country to join the euro economy. As the 17 member euro area faces major headwinds surrounding debt contagion fears, it is unlikely that any other country will join the euro as downside risks remain as growth in the region is expected to lose ground amid the implementation of tough austerity cuts by governments in the bloc. Despite my bearish outlook for the euro heading into the first quarter, it is worth noting that technical indicators point to further gains in the single currency against the greenback in the short term. The MACD and the user defined slow stochastic indicators have yet to reverse course after pointing to increases at the end of December. Focus now shifts to the CPI estimate for December which will be released tomorrow at 10:00 GMT.

Written by Michael Wright, Currency Analyst

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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast

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