euro vs dollar

Euro vs Dollar 1 Nov 2010

With the markets all waiting for both the results of the US mid term elections which coincides with possibly one of the most important FED meetings of all time, we can expect desultory trading until all hell breaks lose on Wednesday.  Meanwhile, Friday’s price action on the euro vs dollar gave us a strong signal that any breakout from the recent sideways price action is likely to be to the upside with the pair probing lower in the morning session only to close back above both the 9 and 14 day moving averages by close of business.  The interesting point to note from the last three trading sessions was that each subsequent low is higher than the last, and indeed above the lows of the previous week suggesting once again that the break out is likely to occur on the bull side which also aligns with the fundamental picture where the market is expecting further dollar weakness as the QE2 programme rolls out.  From a technical perspective the first key price level is USD1.4159 and any break above here will then open the way to a re-test of resistance of USD1.4217 and provided the FED programme gives the dollar kick lower, as expected then we should see the euro dollar the USD1.4579 are in due course.  Whether it will achieve the highs of 2009 at USD1.5140 is debatable but if the FED is as aggressive as suggested then this may well be the case.  The 40 day moving average remains firmly supportive of any upwards move and with the 200 day beginning to turn higher then the outlook remains bullish for the euro.