EUR/USD is pausing for a breath after the fall from 1.60 and before the FOMC meeting. The market is expecting 25 bp rate cut and probably FED will deliver it. If teh statement of the meeting sounds hawkish or even less dovish another leg down for EUR/USD is expected. First major support is 1.5510, then 1.5340. If the latter is broken a deeper correction towards 1.5000 is expected.
The break above 1.6000 was not sustained and a sell off followed. It was accelerated by the worse than expected Ifo index. EUR/USD retraced ti 23.6% level but broke and closed below the lower boundary of the ascending triangle. Further correction towards 1.5500 is possible. The support @ 1.5340 is key and will determine if we’ll stay in 1.53-1.60 range for the next weeks or will break lower for deeper correction of the uptrend.
Finally EUR/USD hit 1.6000. Some options barriers were activated for now and we still are extending the ascending triangle. ECB probably will not intervene ’cause in the last few days they were speaking about the inflation and all that crap. Obviously they are stupid enough and won’t understand that their high interest rates depreciate the dollar and appreciate commodities prices thus pumping up inflation. Whatever, the pattern’s target is 1.6460, support is @ 1.5790.
EUR/USD broke both boundaries of the ascending triangle and closed within the pattern. This means that the market is very volatile and neither bulls nor the bears are winning. Some interesting developments could be noticed these days. Interest rate markets are starting to discount the end of the FED’s rate cuts cycle. This could be very important for determining of the forex market direction. If the FED cut the rates for the last time during their next meeting EUR/USD could break lower. Watch the support @ 1.5670 and 1.5510.
EUR/USD broke to the upside the ascending triangle pattern. MACD shows divergence with the price action but obviously the buyers from Russia and Mid East countries don’t care abot the technical analysis. Some banks and hedge funds are complaining about the excessive volatility as they complained about the low volatility two years ago. The forex market is a little bit crazy and will stay this way until Mr. Trichet realizes exactly what’s going on. Until then the support is @ 1.5910 and 1.5750. The resistance is up in the sky.
After the G7 meeting the forex market opened with gap. EUR/USD tested the lower boundary of the ascending triangle but couldn’t break below so the pattern is still intact. Euro was pushed up by strong Mid Eastern names buying. Probably the Asians and Russians will test the patience of the central bankers and this week we can see a test of the 1.60 handle. What will be the outcome? No one knows. Let;s wait and see. Until then, be very careful and don’t leave long euro positions without stop.
“Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,” the G-7’s finance ministers and central bankers said in a statement after their meeting in Washington. Next week we’ll see if this is enough for the forex market participants to stop the dollar’s free fall. Probably sooner than later the ascending triangle chart pattern will be broken to the upside and a test of the key 1.60 will follow. The pattern’s target 1.6460 seems out of reach for now but if ECB fails to assure the market that it is concerned with the strong euro we may see this number in the near future.
On the downside watch the supprt @ 1.5680, then 1.5630 and the pivotal 1.5340 level. If the latter is broken a deeper correction towards 1.50 is possible.
BoE is not as bureaucratic as ECB and the cable looks weak both against the dollar and EUR. GBP/USD is in consolidation and the direction of the next move will be determined by a break of the support @ 1.9720 or resistance @ 2.0050. Thursday the BoE decision could be the trigger for the next leg lower or higher. We favor the downside with next target 1.9335.
EUR/USD is forming ascending triangle, which is continuation pattern and favors upside break with measured target 1.6460. The momentum oscillator is warning that the uptrend is exhausted and needs deeper correction. If the pair breaks below 1.5340 a double top formation will be completed with target 1.4780.
At this point probably the technical factors are not so important for the EUR/USD. The next direction of the market will be determined by the battle between the Russians and Asians with the Eurozone officials (including ECB). Very important will be G7 meeting at the end of the next week. As usual some ECB members start to realize that the strong EUR is not good for the European economy. How long will take for the mining engineer JC Trichet to realize that the weak dollar is one of the main reasons for the higher inflation? Probably no one knows.
The markets are crazy, even funny these days. After the surprisingly worse NFP the market reaction was more volatility. If you read the comments on Bloomberg’s web site you’ll find out that the oil and copper prices rose because the weaker dollar prompted investors to buy commodities, but platinum and palladium fell on concerns slower US growth will curb demand. Since when the platinum and palladium are not commodities?!?!?!?!
When you see such strange and funny headlines you should know that the markets are crazy and you should be very careful.
