Eurodollar - EUR vs USD Daily Chart 12th June 2009

Eurodollar - EUR vs USD Daily Chart 12th June 2009

One of the questions I am often asked is at what point dollar strength will return to the market, accompanied by a weakening of the Euro as many traders, analysts and economists are confused with the current technical picture given the dire stream of fundamental news on the economic calendar for Europe.   Recent examples include the German GDP figures and this morning’s Industrial Production figures which plunged to a new record low, falling by 22% across the Eurozone.   By any standards we should have expected a significant rally in the US dollar as a result of such poor figures and yet the Euro continues to maintain its upwards path, and one can only assume that this is fuelled on sentiment rather than fact, but also largely helped by the US Fed who promote the sale of dollars at every opportunity.  This was evidenced once again by Dennis Lockhart’s remarks that the “USD role as reserve currency may decline; not made up mind yet to increase Treasury purchases” If and until this anti dollar rhetoric changes it is unlikely that we will see any dollar strength return.   As currency traders we need to be aware of this as the impact on the forex market cannot be ignored making trading this pair extremely difficult.  This dollar weakness rhetoric also spills over into the energy complex and commodities, and until oil prices reverse dramatically then this imbalance will continue unabated.

Technically the eurodollar pair continue to grind their way upwards with a series of closing prices which are each marginally higher than the previous day, with yesterday’s candle managing to break and hold above both the 9 and 14 day moving averages.  However, this is hardly a convincing trading signal and with the G8 and G20 meetings currently ongoing further sideways consolidation seems inevitable and may even continue into next week if no significant news is forthcoming from these meetings.  My trading suggestion is therefore to stay out today and wait until Monday when the market will have had an opportunity to absorb any announcements, and indeed there may be some reaction when the market opens on Sunday night.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.