Euro vs Dollar 23 May 2010

As outlined in last week’s market commentary for the euro vs dollar, the short squeeze duly arrived finally running out of steam on Friday having reached a peak of USD1.2650.  The extent of this rebound exceeded my expectation slightly, having suggested that US1.25 would be the full extent of any short term reversal.  However, Friday’s long legged doji candle which found resistance from the 14 day moving average has now given us a strong selling signal and a firm indication that the rally has run out of steam and with the market currently trading in the USD1.24 region we now look set for a further decline today and in the short term to re-test support at USD1.22 and below.  In the longer term, and provided we breach this area, then expect the pair to drop towards USD1.15 which should signal the bottom of this current downwards trend.

With Bank Holidays in both France & Germany and only the existing home sales data in the US expect price action in the euro vs dollar to be dominated by a combination of technical trading & the ongoing political attempts to shore up the single currency and various sovereign debt problems.

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