euro vs dollar

Euro vs Dollar 4 Oct 2010

The euro vs dollar continued firmly higher last week on the weekly chart ending as a wide spread up candle making it the third consecutive week of gains for the pair as we begin to approach the US1.4 price handle once again, last seen in January 2010.  The break above the 40 week moving average was significant and the next key area is now the 200 week average which currently sits at USD1.3916 and, as such, could present a formidable barrier to any breach of the important USD1.40 price level.  The direction for the euro vs dollar this week is likely to be determined by the fundamental picture with Thursday’s interest rate decision and accompanying statement from the ECB likely to dominate proceedings.  With the US Fed threatening imminent QE measures and the ECB likely to take an opposing view these factors are likely to combine to see the dollar fall once again and the euro rise, resulting in a further pick up in momentum of the recent bullish trend for the euro vs dollar.  The problem for the ECB will, of course, be any further strengthening of the euro which could dent the somewhat fragile recovery in the eurozone economy and certainly not be welcomed by exporters, a problem that many countries are battling in the currency wars.  In summary in the short term we can expect to see the euro vs dollar rise further, possibly run into resistance at the 200 week moving average, and any further strength will then need to be addressed by the ECB in due course to prevent a return to the USD1.50 levels of 2009 or even the USD1.60 of 2008.

The only items of important fundamental news today for the euro vs dollar include pending home sales in the US which came in much better than expected at 4.3% against a forecast of 2.8% and two speeches  from FED Chairman Bernanke later in the day who is attending a Rhode Island convention, so expect some volatility later in the forex trading session.

Dollar steadies as investors trim bets