The inverse relationship between the dollar, USD, and euro, XEU, is clearly evident on the charts. The five-week move, however, needs to pause. For the dollar, the overbot conditions, rising red wedge and negative divergence (red lines) are all bearish wanting to see a spankdown for the dollar in this daily time frame. For the euro, the oversold conditions, falling green wedge and positive divergence (green lines) are all bullish wanting to see a move higher for the euro.
After the near-term pull back for USD and move higher for XEU, the expectation would be for a sideways move ahead for both currencies those expecting a dollar well above 100 will be disappointed and those expecting the euro to collapse to parity (1.00) in the short term will be disappointed.
Of course the ECB meeting on Thursday morning holds the key. It appears that much of the move expected from more ECB QE is priced-into the market. Over the last five weeks, the dollar is up from 94 to above 100 gaining over +6.4%. The euro drops from 1.15 to 1.06 over the last five weeks a drop of -7.8%. The expectation in the near term is for the dollar to pull back and the euro to rally, however, King Draghi holds the ultimate answer and will bring the tablets down from on high on Thursday morning and the central bank will tell global traders how to trade. 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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