Euro vs Dollar - Weekly Candle Chart 9th February 2009

Euro vs Dollar - Weekly Candle Chart 9th February 2009

Trading in the euro vs dollar at the moment is extremely difficult, as the pair continue to re-base around the 1.2900 region in a continuing sideways trend. Last week’s candle open gapped down, and the closing price on Friday ended higher, engulfing the previous candle, and thus providing us with a bullish signal. Whilst this is a positive sign, the upper wick of the candle failed to penetrate the 9 week moving average, and the longer term trend is still bearish, so we must consider any signals that we see, in the broader context of the weekly chart. Trading on one signal is always dangerous, and for a more cautious approach I would suggest waiting for next week, to see whether this signal is indeed confirmed. The key point to make is that the support 1.2550 seems to be holding and providing a base from which to build longer term. If this continues to hold, then we can expect prices to rise in the medium term, but if it is pierced then we could see a fall to 1.2500 and below.

So in summary, a very confusing picture at the moment, and not one that I have great confidence in to be honest. I am not trading in the pair today due to the lack of news and the reasons outlined above, but if you are proposing to open longer term positions, then small long positions would be the strategy, with stop losses below at 1.2500, and to use the daily charts for your entry and exit points.

The short term outlook is bullish, the medium term is sideways and the long term is bearish.