Dollar Rebounds From $1.5651 Against Euro

Posted by Rob

March 14, 2008

The USD rose to $1.5565 after falling to an all-time low against the Euro of $1.5651.

The rise came after speculation that central banks will intervene for the first time in 13 years to strengthen the US dollar.

The rebound reduced the US dollars weekly losses which reached a 12 year low against the Japanese Yen, near parity with the Swiss Franc and over $2 against the pound.

Strategists at Goldmann Sachs and Morgan Stanley believe a coordinated effort to intervene in the sliding dollar is looking ever-more likely.

“According to strategists, ‘the challenge for officials is fighting the $3.2 trillion- a-day currency market while the Federal Reserve reduces interest rates and the U.S. economy falters.’” - Bloomberg

According to technical analysts at BNP Paribas, the Euro may increase gains against the dollar in the coming few weeks. Some technical analysts predict a rise in the region of $1.6120.

A Look At The Chart

Looking at the 1-hour chart for the EURUSD, we can seeprice has dropped back below the 23.6% Fibonnaci line. Price action temporarily stalled on the 55-day moving average line.

Although the price has since fallen through, we can see support for this price around the 55-day moving average line. Whilst we are in a positive trend buy signals are the more popular trade. Although intervention is likely at some point, buy signals still remain the strongest signal for the time being.

We can back-up the buy signal with the stochastic pulling up from below the oversold ‘20′ line. Before entering a trade we are expecting US CPI data at 13:30 GMT. If the data comes out below 0.2%, we could see a buy signal for news traders. For non-news traders probably worth staying out until after, and using the Bollinger band spike method discussed a few days ago on this site.

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