By Russell Glaser – Forex traders may have noticed recently a return to the traditional trading pattern for the EUR/USD; falling after the release of positive U.S. economic data and rising on negative U.S. news. The pair strengthened significantly after the release of Friday’s U.S. GDP numbers, much like the pair did after the better than expected November Non-Farm Payrolls. The market is showing signs of returning to normalcy once seen only prior to the financial crisis. This is reflected in the trading of the EUR/USD pair.
Prior to the financial crisis, the EUR/USD traded in a fairly predictable pattern. The pair would rise following the release of positive European economic news or negative U.S. economic news. The pair would then fall on negative European news or positive U.S. data.
After fall of the investment bank, Lehman Brothers, traders were hesitant to take positions in riskier, higher yielding currencies. As such traders flocked to the safety and stability of the USD, significantly strengthening the currency against the euro.
This has been the case since for the previous year and a half. But now we are witnessing a reversal back to the original trading trend. The USD has been strengthening on positive economic data.
The release of the November U.S. Non-Farm Payrolls report was the turning point. The report was expected to show a decline of 119K jobs for the month. However, the report came as a shock to traders, posting significantly better than expected results with only -11K new job losses.
Since the November Non-Farm Payrolls, the EUR/USD has fallen from 1.5091 to 1.3886, for a cumulative decline of 8%. The latest fall in the pair came last Friday as the U.S. reported 4th quarter GDP numbers that handedly beat economist’s expectations.
This shows the EUR/USD pair is beginning to trade as it once did prior to the financial crisis, falling on positive U.S. economic data.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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