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TECHNICAL ANALYSIS


Euro(lled) Down

06/15/10 11:42:43 AM
by Austin Passamonte

Here's the midterm outlook for the EURUSD price direction.

Security:   EURUSD
Position:   N/A

From its peak high near 1.60 to the current trough near 1.20 euro to the US dollar, the euro/dollar currency, has shed an astounding -$0.40 or -$40,000 per single forex contract position. Needless to say, this downward move has roiled financial markets the world over. Is there a visible end in sight?

FIGURE 1: EURUSD, WEEKLY
Graphic provided by: TradeStation.
 
The weekly chart view of the EURUSD (Figure 1) shows market price just last week fulfilling a long-term 1-2-3 projection lower to 138% from initial trend break one year ago. It took a while to get there and certainly took a serpentine path along the way, but get there it did. Two major trendline breaks in the process each foretold a high probability of lower prices ahead.

FIGURE 2: EURUSD, MONTHLY
Graphic provided by: TradeStation.
 
The monthly chart view (Figure 2) shows the lower projections projected forward -- 1.13 cents to the US dollar value at 162% and the unthinkable $0.98 to the USD down near 233% valuation levels.

FIGURE 3: EURUSD, MONTHLY
Graphic provided by: TradeStation.
 
Note how orderly this pair rallied from lows in 2002 through peak highs in 2008 (Figure 3)? That long-term trendline created from a lower-high pullback in late 2005 to early 2006 became a magnetic attraction through the turbulent descent. Adding a second long-term trendline marked from the most recent lower-high pullback broke with a confirmed close below in May. June 2010 is halfway underway, and a corrective lift from near-term oversold extremes could easily bounce back up to retest former support now presumed resistance. That 1.30+ zone underside trendline is widely watched as the next point to reopen short positions.

Euro-USD valuation is all about what does or does not unfold in the European Union. Any further degradation of national debts or talk of secession from the euro/dollar will spook if not outright shock currency markets lower. Price lines on the chart projected into the future are every bit as valid now as a year ago. Past history tends to repeat itself. Interesting times for all currency markets exist straight ahead.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 06/16/10Rank: 2Comment: 
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