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EUR/USD seems to be waiting for a stronger indication of where it’s going
By: Nexum Capital Markets - 02-04-2008
0votesEUR/USD continues to move in the 1.59-1.54 range, and it will continue to do so until something stronger happens. Euro bulls are now beginning to worry about how strong the Dollar correction could be. Bernanke could trigger the rally as central banks continue to consider to work together in order to aid the US economy and help credit crunch throughout the world.
Europe is now managing a growing concern, high inflation and low growth. Stagflation is much worse that what is happening in the US, and don’t forget that these US problems are very likely to jump the pond and affect Europe and UK as well. So, what will happen when Trichet notices that he’s heading full speed into a concrete wall? The answer is not very clear as stagflation is not an easy problem to solve… But lets get back to the currencies, EUR/USD will continue to move in range. It could go higher and try to reach 1.60/1.62. We believe it wont go much higher after that but lets wait for releases on both sides of the pond. The most important thing we’re waiting for is the analysis of how long will the US be in a recession and how strong will the housing and credit crisis be. Once we have a clear idea about these things, and as the US begins to recover from the current situation, we might as well see a very strong correction towards 1.4000 due to the problems the EZ will be facing at the time. But that is not just around the corner, for the moment lets focus on appearances by Bernanke and Trichet because they can announce at any time that they will work together to solve the financial crisis. Retail sales, Non Farm Payrolls and any inflationary indicator will also be very important in the next few days/weeks. Keep an eye on the ball.
Technicals don’t work very well when volatility is moving the pair 400 pips in 2 days and then getting it back without anything really happening. Indicators are falling out of place and we’ll have to wait to see them reorganize themselves and begin to show the real trend that is being set as we write this report. Lets wait for mayor releases and then we can see what our charts are telling us.
Have a nice week and please remember to focus and be patient.
Next Analysis: USDCAD WeeklyContent Provided by:
Nexum Capital Markets
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