Quote of the day: I will take this opportunity to reaffirm once again that the policy of the United States is to support a strong dollar. We in the United States recognize the special responsibility that we have to contribute to global financial stability in common with development goals as a reserve currency. – Tim Geithner
Another week has gone by and it is time to check some euro and dollar charts…
Upside remains capped by $1.400 for now but uptrend reversal signs are not seen, as recent downside attempts were short-lived – as in the weekly chart below.
- EURUSD weekly chart 10-24-2010
Despite a 450 points pullback in the last week, short-term sentiment remains bullish as long as potential losses don’t extend to fresh lows into the 1.36-1.37 region. Last week’s pre-G20 meeting in Gyeongju, South Korea, was the one of the key events and it closed with an agreement on IMF reform.
According to the COT data, bulls have more reasons to jump for joy as the long positions are increasing a lot since the last breakout at the end of September. Therefore, medium term’s bullishness will probably remain intact – as the Fed could announce a new program of asset purchases (QE2) to support a weak economy as early as November.
Policy makers have also accused the US of engaging in its own devaluation by flooding markets with liquidity from its quantitative easing policies, effectively printing dollars to increase the amount in circulation.
- COT1
- COT2 EUR 10-24-2010
I am bullish on euro against the dollar, although I suspect there will be some more consolidation into current range. But any breakout higher or short-lived pullback will be good opportunities to buy, since current pullback is not unusual after a long bull run.
The dollar index, which is inversely correlated to the euro by 58% and is EURUSD’s most accurate mirror, is currently trading around the 77 level, not far from the rising trend line where it found support a week ago. A potential break below that trend line, corresponding to EURUSD’s break above 1.42, will most likely favor further weakness towards key objectives, such as 74 and 70, lower – hence EURUSD’s $1.5+.
- USDX weekly chart 10-24-2010
- Dollar Index vs EURUSD 10-24-2010
- clowns are not funny
And here are some great articles for you to enjoy this Sunday evening:
- War on?
- The U.S. dollar is doomed
- After the G20 meeting
- Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles
- German Economy Minister Accuses US of Currency Manipulation
OH! almost forgot! if you own an iphone or android device, you should definitely get Angry Birds, it is the most popular and addictive game nowadays. It is a great tool to use while you don’t find any trading opportunities. :-)
Cheers! Have a great week!
