Credit-loss Speculation Sends Euro Down Against USD
After the much publicised credit-losses that have hit the large US banks and financial institutions over the past 10-months, speculation of similar credit-losses affecting European and British banks has sent the GBP and the EUR down against the USD in the currency markets.
Last week we saw the dollar strengthening against the euro by shaving-off over 30 cents. The pound declined by the most in four weeks after figures from mortgage lender Bradford & Bingley spelt out danger in the UK mortgage-lending arena.
Hiroshi Yoshida of Shinkin Central Bank, Tokyo said, “credit losses have the potential to become a euro-selling factor. Bradford & Bingley shows that many of these problems have yet to come to the surface. This is also weighing on the pound.” - Bloomberg
Technical Chart: EURUSD 1-hour
With the USD advancing againt the euro, this could be a key moment for the currency pairing. A look at the 30-min and 4-hour chart shows the stochastic in the overbought terrioty, with the 30-min stochastic near the 20 line, and the 4-hour stochastic hooking down below the 20 line.
Looking at our 1-hour chart above, we can see the stochastic hasn’t yet approached the 20 line. If this point is reached, it could mark a good entry to short-sell the euro.
Notice the 38.2% Fibonacci line is intersected by the falling resistance line. This area could also be a key area to look for a sell signal, if the price doesn’t break above this resistance line. The 55-day sma remains in a down-trend, with current price action just above this line.
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