euro vs dollar

Euro vs Dollar Weekly Chart 11 Oct 2010

The euro vs dollar paused for breath on Friday following the non farm payroll release, trading in a relatively narrow range and ending as a doji cross candle following Thursday’s shooting star candle as the pair hovered below the psychological USD1.4000 price handle.  Friday’s non farm payroll was far worse than expected and as such now brings closer the next round of quantitative easing which will almost be implemented by the FED by the end of this month.  Given the parlous state of the US economy they now have little room for manoeuvre and once implemented will weaken the US dollar further with the euro dollar gaining as a result taking the pair above the USD1.40 level and almost certainly testing the underside of the deep resistance at USD1.4579 in due course.  Should QE2 continue for some time then expect to see the euro vs dollar re-test the highs of late 2009 at the USD1.5150 level.  The key feature of last week’s trading occurred on the weekly chart with the pair breaking above the 200 week moving average, a significant technical event, which further reinforces the present bullish trend.  In addition the 9 week moving average crossed the 40 week, and with the 14 week about to follow suit this is adding further weight to the current bullish momentum.  The problem for Europe, of course, is that the longer this upwards momentum continues then the more problematic will be the increasingly euro strength as exporters (particularly Germany) begin to struggle with a strong currency once again and at some point in the future the ECB may be forced to step in to take some action of its own and align itself with other central banks around the world in the currency wars, as each battles to devalue their currency and protect their respective fragile economies.  For the time being as currency speculators trades for the euro vs dollar are to the long side until we see a technical signal which tells us otherwise.