Euro vs. Dollar 27 Oct 2009

Euro vs. Dollar 27 Oct 2009

Yesterday’s candle for the euro vs dollar ended the trading session marginally lower, but with a deep upper wick and small lower wick, suggesting that bearish sentiment of Monday may have already been absorbed by the market which failed to follow through on the wide spread down candle at the start of the week. However, technically of course we have now broken below both the 9 and 14 day moving averages so a degree of caution is required before we assume that this is simply a temporary pullback in the continuation of the long term bullish trend for the currency pair, and for this to be confirmed we need to consider several aspects of the euro vs dollar chart. The first is whether the strong platform now in place at the 1.47 price handle provides the requisite support to any deeper move lower, and in a similar vein whether the 40 day moving average also comes into play if this does occur. Next we have the matter of the 9 and 14 day moving averages which appear to be moving towards a bear cross, and finally we now have the issue of the recent resistance now in place at the 1.50 price level.  So in summary, the key technical levels will be at 1.47 and 1.50, and my own view is that the current reversal is simply a short term correction in the market, and that the euro vs dollar pair will continue to move higher in due course, a view that will be confirmed once we have broken above the 1.50 price handle and on towards our short term target of 1.55 for the pair. However, should we see any continuation of the downwards pressure today or tomorrow, the 1.47 price level will be key, and if this is breached then this could signal a much deeper move  re-test the 1.4350 price level – personally I think this is unlikely given the systemic weakness in the US dollar, but you never know and this level will be the first critical test of any further bearish sentiment.

Items of fundamental news on the economic calendar started this morning with German Import Prices which came in at -0.9%, marginally below the forecast of -0.7% and these are to be followed by Preliminary German CPI data which is released throughout the day from the 6 German States.  The focus then turns to the US where Core Durable Goods Orders (excluding transportation) are scheduled for 13.30 GMT and are forecast at 0.6% .  This is an important release as it is a leading indicator of production as rising purchase orders signal an increase in manufacturing activity.  At the same time the Durable Goods Orders are also released where the forecast is for 1.2% against a previous of -2.6%.  The next item of fundamental news will be New Home Sales which are forecast at 443k against a previous of 429k.   The day ends with the crude oil inventories. You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency
charts by simply following the links.  I have also included details on an excellent ECN broker.