euro vs dollar chart

Euro vs Dollar - daily candle chart 10th May 2010

As suggested in previous market commentaries USD1.25 has indeed proved to be the interim low for the current cycle even halting the turbulent price action of last week with markets largely driven by fear and panic with plunging equities and alarming bond spreads.  Friday’s inside day candle gave us a strong signal of a short term bounce which was indeed duly realised in early trading this morning with market’s reacting to the so called “bail out” solution for Greece.  However, this temporary euphoria is likely to be short lived as the realisation kicks in that without German support any plans are doomed to remain just that – plans.  With German Chancellor Merkel’s position now severely weakened this is adding further unease and we could even see a German backlash similar to events in Greece with the public on the streets as a result.  From a technical perspective any short term rally should still be seen as a selling opportunity and with the euro vs dollar currently trading just below the USD1.30 price region there should be opportunities to take profits to the downside, possibly to re-test USD1.25 once again.

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