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Euro vs Dollar 17 Sep 2010

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Having initially broken through our three short term moving averages earlier in the week, and subsequently breaching the psychological USD1.30 level, the euro vs dollar is now looking set to continue its recent breakout from the summer’s sideways price action and to regain some of its lost ground with only two major impediments currently ahead.  The first of these is the 200 day moving average which currently sits at USD1.3233, followed by the high of early August at USD1.3334 where the previous rally dramatically ran out of steam.  The first of these should be tested over the next few days and any clearance of the 200 day average should open the way to a test of the second price barrier at USD1.3334.   If this is breached then we could even see the euro vs dollar climb further, possibly even as high as USD1.3750 where further price congestion and resistance awaits.  The present move higher has largely been triggered by a collapse of positive dollar sentiment, rather than in any positive sentiment towards the euro and indeed, much of the recent fundamental news from europe has been either poor or awful, to say the least and, as such, is it is question which currency is the lesser of two evils at present.  The chart to watch, of course, is the usd index and should this find support in the 80 region then this could signal a reversal in the fortunes of the US dollar and a consequent pullback in the euro vs dollar as a result.  In addition the aud usd is one to watch given that it has recently pushed through a significant price level and therefore having a pull through effect on the euro.

The only items of fundamental news likely to impact the euro vs dollar are core CPI and the UoM sentiment indicator in the US so tight stop losses are the order of the day.  Meanwhile there is a eu summit in progress but this is overshadowed by political issues, namely France’s recent expulsion of Roma gypsies.