Euro-Dollar: Downside Projections

Although I am long term bearish dollars, I cannot ignore the fact that the near term outlook for the greenback has changed. Important technical levels (1.40 in the EUR/USD, 1.60 in GBP/USD and 97 in USD/JPY) have been broken and there is a good chance that economic merits rather than risk appetite could be driving the dollar.

The greenback weakened tremendously over a short period of time and was due for a serious bounce. The lack of major U.S. economic data until Wednesday of next week could lead to a further rally in the dollar as the euphoria from the non-farm payrolls report lingers over the currency market. I have been both short and long term dollar bearish since the beginning of May and even though my views on reserve diversification have not changed, it may be better for traders to wait and rebuild those dollar shorts at higher levels. I believe that the sharp rise in bond yields is a combination of stronger investor confidence and concern about U.S. public finances.

Since the beginning of 2008, there have been numerous “corrections” preceding strong rallies in the EUR/USD ranging anywhere from 3.5 to 6 percent. From this week’s high of 1.4340, a 3.5 percent correction would take the EUR/USD down to 1.3840 while a 6 percent correction would take the currency pair down to 1.3480.

eur/usd

Chart: Bloomberg

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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2 Comments on Euro-Dollar: Downside Projections

  1. The EUR/USD continues to flirt with the 1.440 price handle, teasing the forex market with an initial push higher, only to fall back exhausted in later trading, and today’s price action has replicated this once again, promising much in the morning, only to fail to deliver later in the day. However before we assume that this level may prove to be an immovable barrier to any move higher for the euro vs dollar, it is important to note the role of the 40 day moving average, as once again yesterday it provided the platform for a push higher following the wide spread down bar of the previous day, and creating once again a series of lower highers as we edge on up towards this price level. Yesterday’s candle also closed above the 14 day moving average, but marginally below the 9 day average. If today’s candle holds firm then in my view this will be another in a long series of failures to break through the 1.44 barrier, and each time we see a failed attempt on the daily chart then this adds to the likelihood of a move lower in the medium term.

  2. what does that mean to me do i buy $800.00 uds in euros today or wait until may 1st when i travel to barcelona cruise ship will convert all cruise at rate of departure so on may 14 will be last day to purchase at that price of may 1st then do i convert all back to usd before returning on may 18th to usa

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