Euro vs Dollar 7 June 2010

Friday’s widespread down candle finally signalled the breakout we have been anticipating, closing the trading session below the psychological USD1.20 price point.  Friday’s price action for the euro vs dollar cannot be underestimated and this break below the base of the pennant pattern which has been forming in the past three weeks now indicates a substantially deeper move for the eurodollar in the medium term.  My longer term target has always been in the USD1.16 to USD1.18 price band but with many market commentators now openly discussing the complete demise of the euro project, further weakness seems inevitable.  However, a word a caution, when market analysts and the wider media begin to forecast the collapse of any market or instrument this is the point at which it generally rallies – you have been warned!.  In addition the political capital invested in the euro project would make such a failure unthinkable and ultimately unworkable.

Eur vs USD Monthly Chart 7 June 2010

From a technical perspective and moving away from the short term daily chart, the monthly chart now gives us an interesting perspective on the longer future for the euro.  Friday’s low of USD1.1955 along with this morning’s low of USD1.1876 have both tested the 200 month moving average which presents an interesting opportunity for the start of a longer term reversal.  Equally, however, should this longer term moving average be breached then ultimately the next logical pause area is around USD1.1000, with parity a feasible option.

Euro vs Dollar Weekly Chart 7 June 2010

The weekly chart confirms this bearish sentiment with both the 9 and 14 week averages adding considerable pressure to the current downwards trend and now further reinforced by the 40 week crossing below the 200 week moving average.  Given the fact there is little fundamental news of any significance on the horizon today then expect the eurodollar to trade in a relatively narrow range and in the short term we may even see a small rally, although this is unlikely to extend beyond USD1.2150 where the 9 day moving average sits.  As we have now broken below the pennant pattern any recovery should be seen as an opportunity to consider further short positions with the longer term down trend likely to continue.

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Forex News :

Debt worries continue to push euro lower

Euro vs Dollar Analysis 1 Jan 2010

A quiet end to the trading year for the eurodollar which ended in a consolidation phase between the USD1.43 and USD1.44 price region.  However, this sideways price action also included important bearish signals with two of the last three candles closing with significant and deep wicks to the upper body suggesting that the temporary rise in the middle of December was merely a pause before a further decline is seen in the eurodollar in the early part of 2010.

Euro vs Dollar Monthly Chart 1 Jan 2010

For longer term trading the monthly chart is also exhibiting a bearish flavour with December’s engulfing signal now requiring confirmation, and should this occur in January or February then we could see a longer and much deeper move lower throughout the first quarter of 2010 with a possible retest of the USD1.25 price point or even a fall back as far as USD1.20.

Euro vs Dollar Weekly Chart 1 Jan 2010

Finally the weekly chart is also exhibiting a bearish tone & having breached the support area between 1.47 and 1.44 is also confirming a possible move lower for the eurodollar with only the 40 day moving average providing any kind of support and cushion to a deeper move lower.

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