Economy Expected To Withstand Pressure

Posted by Rob

June 19, 2008

The US dollar rose against the euro after better than expected UK retail sales figures led many to believe that the worlds largest economies will withstand the period of economic pressure.

The UK retail sales figures for May were the highest on record, leading to the pound gaining against all major currencies. This is interesting considering the comments from the Bank of England chairman acknowledging that Britain faces “the most difficult economic challenge for two decades”.

Sterling strength has transferred into dollar strength; the U.K. retail-sales number was ludicrously strong,” said Adrian Schmidt, a senior currency strategist in London at Royal Bank of Scotland Group Plc. “The market sees the U.K. and the U.S. as together in the front line of potential weakness in global consumer spending from the credit crunch.” - Bloomberg

Technical Chart: EURUSD 1-hour

EURUSD 1-hour (19-06-08)

From the 1-hour technical chart, we can see the US dollar rising against the euro after UK retail sales helped to bolster confidence in the pound and dollar.

Using Fibonacci retracement we can see that the price has pulled back to the 38.2% line. If price action stalls in this area, we may see a leg up for the euro, especially as the 1-hour stochastic is well into oversold terriotory. We would look for confirmation across additional time-frames. Perhaps looking at the 30min, and 4-hour charts to establish a likely trend for the pair.

[top]