Euro vs Dollar - Monthly Chart Eurdollar 1st June 2009

Euro vs Dollar - Monthly Chart Eurdollar 1st June 2009

As it is the first day of a new month I thought it would be more useful to look at the monthly chart for the euro vs dollar currency pair in order to provide us with a different perspective for this currency pair.  The above chart provides a 10 year view of the eurodollar and puts the current bout of dollar weakness into perspective when viewed in this timescale.  Whilst last month’s up bar comes as no great surprise and indeed closed the month above all three moving averages it is interesting to note how high we are in terms of the overall cycle for the pair with 1.6 as a clearly defined top and 0.85 as a clearly bottom.   It is very easy to assume, following last month’s surge, that the only way to trade this pair at the moment is on the long side, and indeed when based on the daily chart this is the only assumption one can conclude, however, at some point this “easy money” will come to an abrupt end as we see an inevitable reversal in fortune for the US dollar.  The chart shows us just how far the euro vs dollar could fall should this reversal take place.   The key areas on the chart are clearly 1.6 as a resistance to any move higher (which I do not believe will not believed in this cycle), and the 1.25 region as support to any move lower followed by that at 1.18 and then back to parity.   From an analysis point of view the monthly chart is telling us little else other than we have upwards momentum at present and until we see a signal to suggest otherwise this will be the preferred trading direction for the next few weeks.

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