Forex: Downward Pressure Decreasing for EURO Dollar against US Dollar

Euro Dollar against the US Dollar (EUR/USD)

The USD has been strengthening against the Euro since early July, 2008. From around that same date the USD has been falling against the Japanese Yen. Since all major economies are suffering in a severe global downturn it’s difficult to make sense of currency movements based on their relationship to each other.

It would be even more difficult to make logical trading decisions in the currency market based on the state of the major economies and their tumbling stock markets.

Fortunately we have price charts. They represent the truth of current currency valuation and to a large extent give us a fair idea of what to expect, and a means for making logical trading decisions.

Last week I noted there was minor support on the chart at 1.3840, with more distant support at 1.3400-1.3100. On October 2nd the market penetrated the 1.3840 support area, reacted upwards slightly the next, and on Monday, October 5th gapped over the support area and continued downwards for the next two days to a low of 1.3478, very near to the stronger support zone beginning around 1.3400.


EUR/USD chart as at 9 October 2008 using NextVIEW Advisor

TECHNICALS

The market has been reacting upwards, partly in an attempt to close the gap of Monday, October 6th. When the upward correction is complete a further drop down into the support zone, particularly very close to 1.330 can be expected.

MACD – In the last few weeks the MACD reached its lowest in 15 years and is now again testing that area.
NextViewRSI – Showing positive divergence in relation to price, indicating downward pressure is decreasing.

R1 – immediate resistance around 1.3800
R2 – resistance at 1.4300
R3 – distant resistance at 1.4892
S1 – nearby support at 1.3440
S2 – support at 1.3300
S3 – 1.3000

Article and Commentary by Don Schellenberg