Tuesday, June 11, 2013

XEU Euro Daily Chart Upward-Sloping Channel

The euro is developing a pattern of higher lows and higher highs creating the channel.  Draghi was low key last Thursday so without another rate cut announcement the euro catapulted higher as shown by the white candle three days ago. The euro high is near the upper rail of the channel with stochatics overbot and negatively diverged. The RSI is negatively diverged by a hair, this can change quickly, and is not yet overbot, hinting that some additional upside is on tap.  Likewise the MACD and ROC that are long and strong in the near-term. The 1.33 resistance should hold as a ceiling, the current print as this missive is typed is 1.3285. If 1.33 is taken out convicingly, a move to the 1.34 resistance would have to be considered.

On the underside, note the confluence of the moving averages all at 130-ish. The euro will want to join up with its MA's moving forward.  The 200-day MA is sloping higher which hints at a sustained slightly-upward bias moving forward. The 20-day MA and 50-day MA can climb higher faster, towards 1.31, and considering that the bounce started from 1.31, a pull back to this support level is not unreasonable. The drastic drop in the dollar over the last three weeks helps levitate the euro. The euro had a direct relationship with stocks for many months with euro up = dollar down = stocks up and euro down = dollar up = stocks down but this changed this year when the BOJ started to accelerate its debasement of the yen. The weaker yen created the new all-time highs in U.S. equity markets this year. The central bankers dictate the equity market positivity. The last three days hint that perhaps the asset relationship just described will come back into sync.

Overall, the euro and dollar are likely headed for a lot of sideways moving forward. The 1.330-1.334 resistance should hold for the euro leading to a move lower to meet up with the moving averages again. The asset relationships of the yen, dollar, euro, commodities, stocks and bonds are all twisted and mixed at the moment. The markets are trying to sort out the mess created by the central bankers. The euro is flatish in today's action so watch to see if a falling euro occurs in sync with falling equities markets moving forward. The $USD dollar chart is simply the mirror image of the euro chart and the technical analysis is a mirror image as well.  Thus, the dollar is looking for a base here and move higher. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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