The Dollar Euro Pause Has Good Reason but is It a Sell IG

8/3/2019 The Dollar Euro Pause Has Good Reason but is It a Sell IG

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UPDATE

FundamentalTechnical

in association with

2nd February 2012

The Dollar Euro pause has goodreason but is it a sell?



UPDATE

Fundamental

Technical

in association with

Disclaimer26 3

October

10 17 24 31 7

November

14 21 28 5

December

12 19 26 2

2012

9 16 23 30 6

February

13

1.250

1.255

1.260

1.265

1.270

1.275

1.280

1.285

1.290

1.295

1.300

1.305

1.310

1.315

1.320

1.325

1.330

1.335

1.340

1.345

1.350

1.355

1.360

1.365

1.370

1.375

1.380

1.385

1.390

1.395

1.400

1.405

1.410

1.415

1.420

1.425

1.430

1.435

1.440

1.445

1.450

1.455

1.460

38.2%

38.2%

50.0%

61.8%

Diagonal fromJune 2010 low

1.3149 Low

Neckine

1.2950 Low

1.2628 Low

Euro -US Dollar

r May Jun Jul Aug Sep NovDec 2010 Mar Apr May Jun Jul AugSep NovDec 2011 MarApr MayJun Jul AugSep NovDec 2012 Mar Apr

1.16

1.17

1.18

1.19

1.20

1.21

1.22

1.23

1.24

1.25

1.26

1.27

1.28

1.29

1.30

1.31

1.32

1.33

1.34

1.35

1.36

1.37

1.38

1.39

1.40

1.41

1.42

1.43

1.44

1.45

1.46

1.47

1.48

1.49

1.50

1.51

1.52

1.53

i

1.4941 High

1.3149 Low

1.1880

Euro -US Dollar

Dollar Euro’s pause has good reason but is it a sell?

WEEKLY CHART

The market has long-completed a

large and powerful bear Head and

Shoulders pattern that is trying to

send the Euro a lot weaker – at leastas far as 1.13 or so.

But the initial completion move hasbeen reversed - sharply – and the

market is retesting the resistance

from the Prior low at 1.3149 and the

Neckline of the H&S pattern is morepowerful resistance still… around

1.33.

DAILY CHART

Here is the detail: the market has

achieved an exact 38.2%

retracement, and in addition felt both

the bearishness of the 1.3149

horizontal and the influence of the

neckline.

All three have combined to put a lid

on the rally.

But there has been no pull-back yet.

Bears are clearly nervous of selling.

A break of any of the levels on the

downside at the Fib levels of 1.3006,

1.2930 – might be useful triggers for

the bears to begin selling….



UPDATE

Fundamental

Technical

in association with


FUNDAMENTALS:

Late last year, as the US economic recovery began to show signs of picking upspeed and the Euro zone seemed to be sleep-walking to a disorderly collapse, theDollar rallied hard against the Euro.

Despite repeated attempts to rescue Greece and other weak peripheral economies,the news feed pointed one way - the eventual break up of the single currency drivenby:

1. The inability of the Euro zone leaders to agree a formulae capable of resolvingthe debt crisis,

2. The reluctance of Germany to listen to any plan that didn’t involve fiscal austerity,

3. Germany’s refusal to allow the issue of Euro zone bonds,

4. The ECB’s refusal to embark on quantum easing, and

5. A lack of a growth strategy to help Greece et al cut back debt, cut spending andraise taxes in a sustainable way, without needing yet another future bailout.

However, at a last-ditch summit that was meant to resolve the issue once and for all,Germany finally got her way, albeit without the support of the UK. A de facto fiscal

Union is now the goal of 25 of the EU states. Budgetary controls enforceable bytreaty are agreed and Greece continues to negotiate with her private creditors a dealdesigned to impose a 70% haircut on the Greek government debt, which is a defaultin all but name, but isn’t disorderly.

While there is no guarantee that yet more austerity will work, and that Greece will beable to agree a deal, the clock continues to tick towards a Greek default.




UPDATE

Fundamental

Technical

in association with


FUNDAMENTALS: CONTINUED

If Greece fails to get the agreement of her creditors, the Germans look set to block thenext tranche of her rescue funds. Moreover Germany now wants Greece to cede

budgetary control to a new EU budget commissioner which Greece says it will not accept.

Meanwhile traders have become optimistic that a deal to save the day is now more likelythan not and the Euro has recovered a degree of lost ground against the Dollar.

But is this a reversal or a correction?

Lets examine the US side. The US economy has shown greater strength, but over thelast few weeks data has cooled a little with Q4 GDP under-shooting consensus with thestrongest component a worryingly larger-than-expected inventory build-up.

Last week’s FOMC meeting reiterated the Fed’s concerns about the outlook for US

growth saying downside risks remain.

In fact, so concerned were US policy makers that they extended, by one year, the periodthey expect to hold rates at current lows and Bernanke said he has his finger on thetrigger of a 3rd round of QE. All of this helped undermine the Dollar.

But we judge this to be mainly noise.

The US economy is recovering, just not as swiftly as policy makers would like and areused to. The Euro zone economy remains balanced on a knife edge and a Greek defaultwhich would likely start a domino effect within the Euro zone, cannot be ruled out and itlooks questionable whether a policy of austerity without a growth plan will work.

On balance we judge a correction has occurred NOT A REVERSAL and the Dollar

remains Bullish.




UPDATE

Fundamental

Technical

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The Dollar Euro Pause Has Good Reason but is It a Sell IG