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Euro vs Dollar – Daily Analysis 27th March 2009

Euro Dollar - Daily Candle Chart 27th March

Yesterday’s candle for the euro vs dollar pair once again reinforced the short term bearish momentum with the daily high failing to penetrate those of the last 5 days adding to a sequence of six lower highs one after the other, and finishing the day with an “inside” bar.  All of the last 6 candles have long upper shadows suggesting that bullish attempts to move higher have been firmly squashed by the short sellers, a pattern we have seen replicated in this morning’s trading once again, this time with a break through the 9 day moving average which, as I have said before, has been distorted by the price action of the previous week.   The heavy downward tone in the euro was given added impetus by comments from the German Finance Minister, Peer Steinbrueck about the currency implications should member countries not adhere to the rules of  the Stability Pact (ie keep their spending under control to no more than 3% of GDP).    Recent tensions in the eurozone have been recently set aside but this remark clearly highlights the cracks which are starting to reappear.

This morning’s break to the downside is quite significant as it appears to have penetrated the minor support at 1.3420 and any move lower could see a retest of support at 1.3320 region.  Whether this move will continue depends in part on the market’s reaction to the fundamental news out later today, all of which is covered for you in detail on the euro to dollar site or alternatively on the economic calendar.  Of all the items which may have an impact the key one to watch is the University of Michigan Consumer Sentiment which is considered a leading indicator and has therefore impacted on the currency market.   Reports from our ECN broker suggest very thin volumes today which always lead to increased market volatility ahead of the weekend as traders square their positions and look to next week when we have a positive ocean of economic news all topped off with the G20 meeting in London.

My suggestion for today is twofold: first if you have any open short positions from the doji candle of Monday as per my suggestion, then I would move your stop losses down to lock in any profits.  If you considering opening a new position then I would look to sell on any up move in the hourly chart with a view to taking profits off the table during the day.  Under normal circumstances I would also be able to comment on the weekly and monthly candles but they are somewhat indecisive and will have to wait for their close.

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