Analysis on Euro Dollar against US Dollar (EUR/USD)

I smile just a little when I hear major news reporting agencies declare that the USD is losing ground to the Euro because of inflation fears in the USA. While there may be some truth to that, it doesn’t begin to tell the whole story.

The USD has gained back nearly 40% of what it lost since the last strong Euro rally began in late 2005. What it has lost to the Euro in the last few days is hardly measurable in comparison.

From a technical perspective, easily seen on a price chart, the market is responding to mathematical support I calculated over two months ago. What I cannot guarantee is that this support will hold. The market is very stretched to the downside right now, so some upward and sideways correction of the current downtrend on the chart, will not be a surprise.


Daily EUR/USD chart as at 21 August 2008, using NextVIEW Advisor

TECHNICALS

The first significant area of resistance is around 1.5000.
It also seems that the price pattern forming on the chart is not yet complete, so we have to be aware that at some point the recent low of 1.4628 can break to the downside with a first support target at the rising trend line at 1.4500.

R1 – Nearby resistance at 1.5000
R2 – Second resistance at 1.5250
S1 – Nearby support at 1.4500
S2 – Second support at 1.4250

NextView RSI – rising from drastically oversold levels. A break above 1.4805 will aim for a first target of 1.4900 and then, potentially, 1.5000-1.5050.

MACD – a rise above 1.4805 will probably trigger a short term buy signal on the MACD.

200EMA – this moving average is generally believed to create potential support and resistance, and is now in the area of projected resistance.

Analysis and Commentary by Don Schellenberg