Euro vs Dollar Daily Chart - 5th May 2009

Euro vs Dollar Daily Chart - 5th May 2009

Yesterday’s thin markets produced an extended rally in the euro vs dollar closing marginally below the 1.34 region and adding some bullish momentum to an otherwise range bound currency pair.  It was strange to note that this was against a backdrop of three consecutive days of apparent bearish behaviour and therefore I would suggest that yesterday’s up move be viewed in this context.  In addition whilst we may expect further dollar weakness during this month a check on the dollar index certainly does not suggest such a significant weakness is apparent at present, therefore adding a further question mark over yesterday’s move.   With all three moving averages having converged this again paints a less than clear picture for any convincing analysis, and as outlined in yesterday’s market commentary this may be the theme for the rest of May with conflicting signals against a backdrop of significant fundamental news, not least of which is the initial release of the stress test on banks later this week, with some commentators suggesting that we may see 10 out of the 19 major US banks requiring additional injections of capital in order to stabilize their balance sheets.  The US dollar itself is now correlating more closely with the equity markets on an inverse basis, so as equities rise the US falls and vice versa.  The question, of course, is whether you believe the bull run of the last few weeks is a false break or a long term reversal to the previous bear market, and only time will tell.  The old adage of “sell and in May and go away” may well have more than a ring of truth in it this time around and we could be seeing a period of sustained sideways consolidation across all markets.

My trading suggestion for today remains the same as yesterday, and probably for the remainder of the week, unless we see some clearer trading signals in both the daily and weekly charts, and that is to look for intra day swing trading opportunities with a bias to the long side of which today there have already been several.  Whilst there is no fundamental news on the economic calendar for the euro this afternoon does see the non manufacturing ISM data for the US which if it comes in better than expected may temporarily cap the euro’s recent up move.   You can find more detail on the eurodollar site.

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.