Euro v USD Chart 7 Jan 2010

The euro dollar ( like many other currency pairs at present) continues to trade sideways lacking any firm direction as we wait for today’s  seminal figures from the Department of Labor, which could add further momentum to the initial recovery in the US dollar seen during  December. With the currency pair currently trading in a relatively narrow range, and marginally above the deep support level between USD1.38 and USD1.43, the longer term direction for the euro vs dollar is far from clear at present, and there are certainly no clear signals on the daily chart.  However, should tomorrow’s NFP data provide the expected boost to the US dollar, then a break below 1.4150 will indicate that the bearish sentiment of late 2009 is now firmly in place, and longer term we can expect to see the pair fall far and fast as the pace of US dollar buying picks up over the next few months. Technically the chart looks ready to rollover and move lower at speed, particularly given the number and depth of upper shadows to the recent series of candles in the consolidation area. All in all, the daily chart looks week, so expect to see the pair fall today, provided the NFP data is US dollar positive.

As well as the non farm payroll data today the market will also be evaluating the US employment rate which is expected to stay unchanged at 8.5%.  Meanwhile in Europe the German trade balance has already been released and come in at 17.2bn against a forecast of 12.3bn while the French trade balance has registered -5.3bn against a forecast of -3.9bn.  The European unemployment rate is expected later at 9.9% (marginally worse than previous) as well as final quarter GDP which is expected unchanged at 0.4%.  The last item of data for Europe will be the German Industrial production numbers which are expected at 1.1% against a previous of -1.8%.  Thus far all the European data has simply confirming a two tier recovery with Germany (and France) racing ahead of the rest.  Spain now holds the EU presidency and given the parlous state of their own economy – for example unemployment at 20% – it will be interesting to see how they attempt to deal with the current tensions and contradictions.

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Support & Resistance for Eurodollar (daily chart):

S1:  1.4317    R:  1.4464

S2:  1.4235    R2: 1.4529

S3:  1.4170    R3:  1.4611