euro vs dollar

Euro vs Dollar 20 Sep 2010

A seminal week for the euro vs dollar from both a fundamental and technical perspective and indeed we could be witnessing the start of a significant change in sentiment for the euro dollar as a result.  Technically Friday’s candle has given us the first sign that the recent bullish trend over the last few days is now beginning to wane and run out of steam, ending the forex trading session on Friday with a shooting star candle sitting neatly at the top of the recent rally.  The significant pullback in late trading on Friday was linked to the debt problem in the eurozone, in particular the Irish banking structure.  As such this is a strong signal of bearish intent particularly given the 200 day moving average which the rally on Friday failed to breach and is also coupled with the previous high at USD1.3334 where the rally of July and early August ran out of steam.  For any confirmation of this change in sentiment we need to wait for an initial break and hold below the three short term moving averages which are bunched between USD1.2868 for the 14 day to USD1.2904 for the 9 day.   Any move below here would then re-test the underside of the price congestion at USD1.2587, followed by a re-test of support at USD1.2387 and beyond.  This change in sentiment is also reflected in the open interest volumes which have moved sharply lower from 257k two weeks ago to 170k for last week, clearly indicating a massive shift in the futures market towards the euro.  Open interest volume is something I follow personally closely and look for these types of turning points and coupled with the technical signals on the daily chart the markets seem to be lining themselves up for a big move.  This is also reflected in the usd index chart where we are seeing a bottoming out of the recent downwards slide.  However, patience is required and we need to wait for these signals to be confirmed.

This week’s fundamental news for the euro to dollar is dominated by tomorrow’s FOMC meeting and Friday’s German Ifo business climate release.  These details, along with the remaining items can now be found at my main forex trading site.