Euro vs Dollar Chart 18 August 2009

Forex Technical Analysis for the Euro vs Dollar

Yesterday’s relatively wide spread down bar on the euro vs dollar chart was significant for two reasons:  firstly prices opened gapped down from Friday’s close suggesting that the bearish sentiment which is currently evident may have some impetus.  Secondly prices closed below the 40 day moving average which would tend to reinforce this view.  However, this analysis has to be counterbalanced against the performance the equity markets which although have seen dramatic falls in China and an almost 2.5% fall in the S&P500 has not really translated as strongly as we would have expected into dollar strength but appears simply to expanded the euro vs dollar trading range to between USD1.38 and USD1.43.  Whilst this expanded range will provide trading opportunities for swing traders and scalpers, longer term position traders may have to wait until there is a clear and sustained breakout either side of the current range.

Fundamental News for the Euro vs Dollar

Although there is a detailed analysis of the fundamental news for this pair on the main euro to dollar site today traders should focus on the German ZEW Sentiment Index, a diffusion index based on a survey of German institutional investors and analysts.  In fact the survey asks around 350 German institutional investors and analysts  to rate a 6 month eonomic outlook for Germany.   It is considered a leading indicator of economic health as the participants are considered highly qualified by virtue of their job, and changes in their sentiment can be an early signal of future economic activity.  If the actual is better than forecast then we can expect the Euro to benefit accordingly.

My trading suggestion for today is to wait for the release of the German ZEW and if, as expected, it comes in better than expected to look to profit from an upturn in the Euro.

Euro vs Dollar Daily Chart 10 August 2009

Friday’s wide spread down bar on the euro vs dollar daily came as a great relief to Dollar bulls who had all but thrown in the towel since the great breakout of last Monday as momentum from NFP figures sent the Eurodollar plunging straight back into the USD1.42 congestion area.  In addition Friday’s close finished well below both the 9 and 14 day moving averages.  However, before the Dollar bulls become too euphoric any move lower will require sustained effort and force to drive through the strong support zone immediately below and I suspect that the markets will now await until Wednesday for the FOMC statement before deciding whether this is merely a short term reversal or the start of the long claw back by the US Dollar.   At the same as the FOMC meeting this week’s sees a raft of data from China which should give the markets some clear signals as to whether we are really at the dawn of a sustained (and sustainable) global recovery.  These two factors may also confirm whether the recent tight correlation between the US Dollar and equity markets may now be coming to an end and whether the FED is likely to signal the start of any tightening of their monetary policy.  My trading suggestion for today is to stand aside given the complete lack of life or momentum in this currency pair.

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.