Euro vs Dollar - Daily Candle Chart EUR/USD 4th June 2009

Euro vs Dollar - Daily Candle Chart EUR/USD 4th June 2009

Yesterday’s candle on the euro vs dollar daily chart, has provided plenty of food for thought, and an interesting candle which closed the day on a wide spread down bar, with a small wick to top and bottom,and reversing the gains seen in the euro in the last few days. The question of course is whether this is simply a short term reversal whilst the market takes a breather after the long rally last month, or is perhaps more significant, suggesting a reversal in the fortunes of the euro? The reason for the fall yesterday was largely as a result of dollar strength returning to the currency, following a fall in equities prompted by weak fundamental news, and as a result many analysts and market commentators suggesting that the V shaped rally in equities has now peaked. Whilst this could be true, and we are possibly witnessing the start of a downturn in equities and a resurgence of the US dollar, one bad day on the markets does not represent a turning point, and the same applies when analyzing the daily candle chart for longer term signals.

The down candle of yesterday, has certainly provided a bearish engulfing signal, which we cannot ignore, and time will tell whether this signal is confirmed in due course, or simply ignored as the market moves higher. However, one element of yesterday is particularly revealing, and this is the low of the day, which failed to penetrate the 9 day moving average, which in fact acted as a support level, suggesting that this my simply be a short term reversal, rather than a longer term top. However, as always, we cannot trade on one signal, and therefore need to wait for today’s price action to see whether the candle is indeed confirmed, or simply ignored, and I would therefore suggest that you wait before entering any news trades, particularly as we have the NFP figures around the corner tomorrow.

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