Jun 10, 2011

EUR vs. USD – Short Term Outlook

 

The Euro index movement almost coincides with actual forex move of the pair. Recent peak of the index was clean expectation based trading of the ECB decision of possible rate hike in the Euro zone. At the moment it has the higher interest among developed world – 1.25% compared with close to zero rates in US and Japan. After the Thursday announcement the index dropped in contradict with logic that widening interest differential should support the euro. The fact that market are in correction and investors are more risk averse is pushing them to support the greenback.

20110610eurindex

Chart source: stockcharts.com, Chart analysis: investink.net

Technically the trend is positive for the euro but divergence between last two index peaks and moving average histogram is clear signal for trend reversal. The support is determined by cross point between parallel channel support line and 200 moving average around 137.50 level of the index. This could be translated to roughly 1.38 usd per euro.

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