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TECHNICAL ANALYSIS


Euro Zoned

04/04/11 12:12:06 PM
by Austin Passamonte

Here's the near-term price outlook for euro currency futures index.

Security:   6E
Position:   N/A

For the past year or more, European nations that use the euro currency have taken turns being downgraded on debt instruments, nearing default on payments and negotiating financial bailouts among one another. In days gone by, that would have trashed the euro currency as flight to quality flew somewhere else as perceived safe haven. See Figure 1.

FIGURE 1: EURO FUTURES, DAILY
Graphic provided by: NinjaTrader.
 
The venerable 1.42 level in EUR/USD futures was widely remarked as a solid line in the sand (ceiling?) when it was reached back in November 2010 at its peak. Even with the current flareup of euro country debts and potential defaults, the currency continues to climb against the US dollar. That speaks volumes as to what the world thinks about near-term potential for USD strength or, more aptly, lack thereof. See Figure 2.

The latest five sessions at time of this writing were all positive closes on increasing volume each day. Price managed to close above the 1.4200 line and rests within an easy blip to new recent highs from there. That Friday, the April 1st (most recent), session was also a bullish engulfing bar/candle that eclipsed the prior session on both ends. There is no visible weakness in this symbol on its daily chart at all. Ascending trendline (navy blue) would be the first mark watched for any downside tests to come.

FIGURE 2: US DOLLAR INDEX, DAILY
Graphic provided by: NinjaTrader.
 
The US Dollar Index is heaviest weighted against the euro, then other currencies scaled from there. It has held initial tests of the prior swing low in November 2010, but zero signs of any sustained strength exist in this chart. April 1's rejection of attempts to rally marks the fourth consecutive close beneath the lowest descending trendline of resistance. It would take a decided break above all three current descending trendlines and close(s) above 77.50 before anyone could accuse this chart of bullish hints to come.

We might not see very much movement in the US dollar from now until the late-April FOMC event unfolds. How the euro fares against others such as the Swiss franc and the commodity currencies (AUD, CAD, NZD, and so on) could mean the indirect effect of where 1.42 remains support or becomes resistance again.



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: 04/04/11Rank: 5Comment: 
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