Euro vs Dollar Chart 7 April 2010

The eurodollar’s recent short squeeze higher has now been reversed with the 40 day moving average proving to be a turning point once again with the pair failing to break the USD1.36 price handle, and as a result re-establishing the longer term bearish trend.  This was further reinforced yesterday with a relatively wide spread down candle which closed well below all four moving averages.  The bearish sentiment has continued in this morning’s London session and we are now approaching a key technical level at USD1.33.  If this price point is breached then we can expect to see the euro vs dollar plunge further, initially to re-test support USD1.30 area and in the longer term towards our longer term target of  USD1.25 which could signal the floor of the current trend.  As outlined in several previous market commentaries any further short squeeze higher should still be seen as opportunities for entering fresh short positions.

Today’s fundamental news for Europe has been dominated by German factory orders which came in better than expected at 0% against a forecast of -0.8%, and the final Q1 GDP numbers which were revised downwards to a flat 0% against an expectation of a 0.1%, so the recovery in Europe remains fragile and precarious.  The Greek sovereign debt issue refuses to go away and could well trigger a further short squeeze should the markets receive any credible statements from either France or Germany so do not be surprised to a see a reaction to the long side in what is otherwise a long term downtrend.

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