Well, on the last post I shared with you how skeptical I was on that last EUR/USD rally and why. The reason: The USD/CHF didn't correspondingly break below support as EUR/USD broke above resistance.
On top of that, central bankers have been reiterating their thoughts on the latest G-7 meeting which brought out the point that they weren't happy with the recent volatility (interpretation: They don't really want the EUR/USD up here at these lofty levels).
Yesterday we got a bit of a retracement of the EUR/USD but today we got even more of a push lower and without the first stitch of fundamental data being dollar pullish or a euro negative.
Now the question is....will that U.S. Dollar Index double bottom? If so, that really could change the long term trend direction of the EUR/USD.
Anyway...back to the EUR/USD presently...it's broken down on the hourly charts. Check out the chart below. Click on the chart to enlarge it.
The dollar takes the euro "behind the woodshed" today.
The technicals are turning downward quickly on this pair. If these low levels can hold by the close of the today...that would be another bearish sign for the pair.
In the mean time, continue to watch the oil chart...since it and EUR/USD have really tracked each other as "anti-dollar" trades.
Also watch to make sure than USD/CHF continues higher as EUR/USD heads lower. These two will be great "confirming" tools as we watch this unfold.
Because the euro bulls won't give up easily....so there will be rallies upward even if the "highs" start to get lower overall.
With the worst of the U.S. sub-prime/credit crunch/economic slowdown behind us, the buck could get a sustainable break overall for quite a while.
Tons of foreign capital is starting to flow into the U.S. once again (as shown by the TICS flow numbers this past week).
So if foreigners think we're at or near a bottom in stocks...they'll have to buy into dollars before buying stocks, bonds, real estate, etc....since all of our stuff is denominated in dollars.
It's been nice sharing my thoughts with you over these past months.
My buddy Jack Crooks will be taking over for me shortly.
Happy Trading!
Sean Hyman
Currency Analyst
The Sovereign Society
We should also remember that earlier this year (28th Feb to be exact) Hans Werner Sinn head of the German IFO economic research think tank stated that the euro would only become a problem for the mighty Germans if it rose above 1.60.
With Berlusconi's recent election Sarkozy now has an ally who is determined to humble the ECB. France and Italy against the Germans - there are interesting times ahead!
Posted by: Anna Coulling | April 19, 2008 at 01:31 PM