You are on page 1of 5

16th September 2011

UPDATE

Technical Fundamental

The Dollar Euro rally looks vulnerable

in association with

Disclaimer

Authorised and regulated by the FSA

The Dollar Euro rally looks vulnerable


Euro - U S D ollar

1.6017 High

in association with
1.4941 High 0.0%

13841 38.2%

UPDATE Technical Fundamental

50.0%

61.8%

100.0%

1.63 1.62 1.61 1.60 1.59 1.58 1.57 1.56 1.55 1.54 1.53 1.52 1.51 1.50 1.49 1.48 1.47 1.46 1.45 1.44 1.43 1.42 1.41 1.40 1.39 1.38 1.37 1.36 1.35 1.34 1.33 1.32 1.31 1.30 1.29 1.28 1.27 1.26 1.25 1.24 1.23 1.22 1.21 1.20 1.19 1.18 1.17 1.16 N D

WEEKLY CHART
The markets breakdown through the twin diagonal supports at 1.40 or so remain in place. The second critical point of reference is the low at 1.3841. And the Fibonacci support at 1.3780 A second close below that band 1.3780-1.3841 on the week would be a powerful affirmation of the bear case.

O N D

2008 M A M J J A

S O N

D 2009 M A M J J A

S O

N D 2010 M A M J

A S O N D 2011

M A

M J J

A S O

Euro - U S D ollar

1.505 1.500 1.495 1.490 1.485 1.480 1.475 1.470


1.4534 100.0%

DAILY CHART
The sharp rally from the recent low has concentrated the minds of the bears. We note the resistance at 1.3841, so far powerful, and the Fibonacci resistance at 1.39. Short-term bulls will want the market to close above that band to sustain their optimism For the moment 1.3841-1.39 looks to be strong short-term resistance .

1.4576 High

1.465 1.460 1.455 1.450 1.445 1.440 1.435 1.430 1.425 1.420 1.415 1.410 1.405 1.400 1.395
38.2% 1.3841 Low

1.390 1.385 1.380 1.375 1.370 1.365 1.360 1.355

0.0% 1.3501 Low

1.350 1.345 1.340

Disclaimer

4 April

11

18

25

2 May

16

23

30

6 June

13

20

27

4 July

11

18

25

1 8 August

15

22

29

5 12 September

19

26

3 October

The Dollar Euro rally looks vulnerable

FUNDAMENTALS:
in association with

After a prolonged period of range trading, Dollar/Euro finally broke out (9 th September) with the Dollar strengthening decisively. But before we explore why the range finally gave way, a reminder of why the range held for so long might be useful. The Dollar was constrained by several factors: 1. The slowing economy, despite the Feds QE2, 2. A growing fear the economy might slip back into recession, 3. A budget deficit and debt build up that was considered negative for the US economys long term heath, and 4. The political stand off between the President and House Republican over raising the Debt ceiling, since resolved. But equally, the Euro was hobbled too: 1. The long running Sovereign debt crisis, still unresolved, 2. Fear a peripheral state; Greece, could default, and 3. Fear of contagion. And was supported by the ECBs interest rate hiking cycle. Result stalemate and the long-held range. So where are we now? In the US, the economy remains weak and a recession may result. The Fed looks set to deliver QE3 at some point in the near future, and although an agreement was reached to hike the debt ceiling and reduce the budget deficit, the deficit cut fell short of expectations. However, the problems are known and quantifiable.

UPDATE Technical Fundamental

The Dollar Euro rally looks vulnerable

FUNDAMENTALS: CONTINUED
in association with

In the Euro zone, despite Ireland, Portugal and Greece being bailed out via the Euro zone rescue fund, the Sovereign debt crisis rolls on. Indeed, Greece might yet default and leave the Euro zone. Additionally Spain, Italy and even France have fallen prey to markets fearful that their debt burden is too great and needs reducing. But after 1 years political leaders still seem unable to come up with a credible solution. Now the focus has widened to take in the Euro banking system which many believe is on the brink of a new financial crisis. Moreover, the Euro zone economy is starting to feel the stress and strain and data has turned mixed, leading to fears of a fresh Euro zone recession. The ECB has responded by halting its rate hiking policy. And it was this act that allowed the Dollar to make sharp gains against the Euro. But what really helped the Dollar and weighed on the Euro was Starks resignation from the ECB over policy differences. Over the last five days the Euro has steadied and recovered some of its losses. But this is due to the major Central Banks pumping large amounts of Dollar liquidity into the markets to aide the Euro zone Banks and others that are funding it increasingly difficult to get Dollar funding. Dont be fooled, traders will not respond so positively to liquidity provision for ever, the core issues will move back to centre stage and the Euro will weaken further, and remain weak until the Sovereign debt crisis is resolved.

UPDATE Technical Fundamental

in association with

UPDATE Technical Fundamental

SEVEN DAYS AHEAD Authorised and Regulated by the FSA 124 REGENTS PARK ROAD LONDON NW18XL TEL +44 (0) 7849 922573 E-MAIL msturdy@sevendaysahead.com, pallwright@sevendaysahead.com WEB SITE SEVENDAYSAHEAD.COM The material and information set out in this research is not intended to be a quote of an offer to buy or sell any financial products. Any expression of opinion is based on sources believed to be reasonably reliable but is not guaranteed as to accuracy or completeness. The material and information herein is general and for informational purposes only. Although Seven Days Ahead endeavours to provide useful information they make no guarantee as to the accuracy or reliability of the research. The derivative market comprises volatility and considerable risks. To the maximum extent permitted by law no responsibility or liability can be accepted by Seven Days Ahead, any company or employee within its group for any action taken as a result of the information contained in this presentation. You are requested not to rely on any representation in this research and to seek specific advice from your accountant, legal adviser or financial services adviser when dealing with specific circumstances.

Seven Days Ahead is regulated by the UK Financial Services Authority.

You might also like