Euro Breaks $1.50 Mark

Posted by Rob

February 27, 2008

The Euro strengthened to more than $1.50 dollars for the first time in the short history of the Euro currency.

Speculation that Bernanke will cut US interest rates further brought further weakness to the USD. German business confidence unexpectedly strengthened in February which lessened predictions of an ECB rate cut.

The USD also fell to an all-time low against the Swiss Franc (CHF). Bernanke will give his semi-annual testimony in Washington at 15:00 GMT, and will appear before the Senate Banking Committee tomorrow.

The slump in the USD sent oil prices above $102/barrel today, as well as increasing the cost of other commodities such as Gold and Silver. Food resources also rose today, including wheat and cocoa.

With a doveish outlook some analysts are predicting inflation above estimates, and slower recovery, especially with higher oil prices.

A Look At The Chart

From the EUR-USD 1-hour chart we can see the sharp rise in favour of the Euro. After being stuck in a tight range on the 22nd February, the 26th marked a strong shift with the Euro breaking away.

This trend has continued today with expectations of Fed benchmark rate cuts.

We can see that the price action is moving above the 55-day moving average, as well as the 20-day moving average. The most recent candle shows that the price broke through the upper bollinger band briefly after retracing back below. With a 90-95% probability that price action moves within the bollinger bands we would expect a temporary retracement before any further upside is seen.

A look at the stochastic shows a weakening trend marked by lower tops, despite the price action continuing to rise. This would indicate a weakening trend, and a possible reversal. However, now that the Euro has broken through $1.50 dollars, and with a doveish announcement expected, we would continue to favour buying Euros’.

Worth noting is the price action retraced to the 23.6% Fibonacci line before continuing the up-trend to the new all-time highs above $1.50. Before entering a trade it is worth waiting for a strong indicator on the stochastic, a cross upwards above the 20 line and a retracement to the 23.6% or the 38.2% line for an entry signal.

[top]