Market Timing  |  JUN 1999

The Euro’s Weekly Cycles by Walter Bressert and Doug Schaff

The Euro’s Weekly Cycles As a followup to last month’s introduction to the newborn European currency, here’s what may happen to the Euro. n January 4, 1999, the 40odd years of planning and 10 years of political and economic work paid off as the Euro began trading in a calm, orderly manner. But what’s the bottom line? How will improved efficiencies from a single currency affect Europe’s competitiveness? When will the Euro’s status as a reserve currency begin to shift demand away from US dollars? The brandnew European Central Bank (ECB) is determined to establish its credibility. Europeans, on the other hand, having accepted large doses of fiscal and monetary tightening to establish the Euro, are now ready for payback in the form of economic growth. In the midst of this uncertainty, it’s not so surprising that the Euro initially put in a weak price performance. Starting off at 1.1630, it quickly put in its high just above 1.1900 and by mid-February had traded down to 1.1200. The fundamentals will probably sort themselves out by summer. By then, the economic slowdown in Europe will most likely be over. In the meantime, cycle analysis offers guidelines regarding time and price levels at which the Euro should bottom. Let us apply additional technical tools, oscillators, and trend indicators to develop a trading methodology for the Euro using weekly cycles.

by Walter Bressert and Doug Schaff