Jul 11, 2012

EURUSD in a bear hug



EURUSD has been falling since the beginning of 2008 with bear market clearly seen on the chart. Recently intensified European problems threaten single currency dive down to new multiyear lows. With problems still deepening and slow decision making the rise of the euro seem to be postponed.

Ten year chart of EURUSD shows two cycle pattern. The bullish market, which started 2002, lasted 6 years. The peak was formed in 2008 when the crisis erupted. If we assume that the bear market would be with the same duration as bullish one the end of this cycle could be dated at the end of 2013 or the beginning of 2014 with target 1.08. Of course such assumption is based on approximation as the strength of the euro strongly depends on the ability of the Euro leaders to manage the situation. Moreover considering the fact that world growth is slowing additional stimulus form central banks is expected. Although opposing it for now FED could be pushed for another round of quantitative easing if unemployment stays at elevated levels and GDP growth slows below 2%. In that line of thoughts not the dollar is strong but the euro is weak and that is what has been driving the EURUSD exchange rate over last 3 years.  

EURUSD target for 2013 end is in the 1.05-1.15 area however the pair has to overcome some important support levels at 1.1870 and 1.1440 – both 2003 lows.

EURUSD in bear market
EURUSD in bear market
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