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Eur Usd Forex Chart Analysis 18 August 2009

Forex Technical Analysis for the Euro vs Dollar

Yesterday’s relatively wide spread down bar on the euro vs dollar chart was significant for two reasons:  firstly prices opened gapped down from Friday’s close suggesting that the bearish sentiment which is currently evident may have some impetus.  Secondly prices closed below the 40 day moving average which would tend to reinforce this view.  However, this analysis has to be counterbalanced against the performance the equity markets which although have seen dramatic falls in China and an almost 2.5% fall in the S&P500 has not really translated as strongly as we would have expected into dollar strength but appears simply to expanded the euro vs dollar trading range to between USD1.38 and USD1.43.  Whilst this expanded range will provide trading opportunities for swing traders and scalpers, longer term position traders may have to wait until there is a clear and sustained breakout either side of the current range.

Fundamental News for the Euro vs Dollar

Although there is a detailed analysis of the fundamental news for this pair on the main euro to dollar site today traders should focus on the German ZEW Sentiment Index, a diffusion index based on a survey of German institutional investors and analysts.  In fact the survey asks around 350 German institutional investors and analysts  to rate a 6 month eonomic outlook for Germany.   It is considered a leading indicator of economic health as the participants are considered highly qualified by virtue of their job, and changes in their sentiment can be an early signal of future economic activity.  If the actual is better than forecast then we can expect the Euro to benefit accordingly.

My trading suggestion for today is to wait for the release of the German ZEW and if, as expected, it comes in better than expected to look to profit from an upturn in the Euro.