Euro vs Dollar Chart 27 Nov 2009

Euro vs Dollar Chart 27 Nov 2009

The price action across the financial markets of Thursday and Friday has posed some interesting questions for us as technical chartists for several reasons, not least because as far as we are concerned the starting point for any analysis is simply that the view of the market is contained within the price action on the chart, and nowhere else, whether it be Dubai, US holidays, or any other fundamental or speculative rumour that happens to hit the market. So technically, for the euro  dollar these are the issues on the daily chart that we now need to consider. Firstly, Wednesday’s strong breakout from the well developed pennant pattern was a clear signal that the bullish trend had been re-establised once again with an expection of the euro vs dollar moving on towards 1.52 and then to our medium term target of 1.55. This was followed on Thursday, with the US markets closed and therefore very thin volumes with a wide spread down candle, which engulfed that of Wednesday, giving us a bearish engulfing signal, or looked at another way, a two bar upthrust or shooting star. Finally, of course, this brings us to Friday’s candle, a deep hanging man, and a bearish signal once again. So what has happened since Wednesday’s strongly bullish signal, and Friday’s close? – technically nothing as we have the picture in front of us all the time, whilst behind the scenes the market was allegedly spooked by problems in the Middle East and with US markets closed on Thursday, and with most traders and investors in the shops on Friday, this gave the currency markets plenty of oportunity to react to rumour, gossip and speculation in equal measure on thin trading volumes. So which way are we going now?  If the above price action had occurred in normal trading volumes then I would have no hesitation in suggesting that this is a top and could therefore reasonably expect the market to fall from here – however, all the above price action occured over a ‘technical’ two day holiday, and as such we have to be cautious and whilst the chart is indicating a bearish tone, my trading instinct is telling me that this is simply a short term pullback on thin volumes and that the breakout of Wednesday will be confirmed in due course once again.

There is little fundamental news of any significance in Europe other than Eurozone CPI Flash Estimate expected to come in 0.5% and the Italian Preliminary CPI data forecast at 0.2%.  Far more noteworthy for Europe is whether Greece will follow Dubai and likely to have problems rolling over its debt obligations and thereby making it the first of in the developed economies to do so.  Comments from Jean Claude Trichet referring to certain members being “very close to losing their credibility” has been taken as a reference to Greece.   Meanwhile the only item for the USA will be the Chicago PMI figures which are expected to come in at 53.4, slightly below previous.

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Support & Resistance for Euro Dollar :

S1:  1.4876    R1:  1.5048

S2:  1.4766   R2:  1.5110

S3:  1.4704   R3:  1.5220