Euro Falls Back Against Dollar

Posted by Rob

April 10, 2008

The Euro fell back against the greenback after European Central Bank President Jean-Claude Trichet suggested the financial market crisis will continue longer than anticipated.

The ECB’s President continued with a hawkish outlook for the time being by leaving the benchmark rate at 4 percent.

Trichet said “we are experiencing a rather protracted period of temporarily high annual rates of inflation.” - Bloomberg

Holding interest rates at four percent should help to contain the increased inflation risk during the next quarter.

What The EURUSD Chart Shows

From the EURUSD 1-hour chart we can see the pull back in price action after the results of the ECB monthly meeting. It appears Trichet’s suggestion at further financial uncertainty led to traders lossing some confidence in the Euro, wiping out todays earlier gains against the USD.

From the 1-hour chart we can see the price spiked outside the top Bollinger band, and has since retraced breaking through the 20-day moving average line. It seems unlikely that the price will retrace as far as the 55-day moving average line as this is very close to the 50% Fibonacci line.

The stochastic is pointing downward. The price looks likely to meet some resistance around the 38.2% Fibonacci line, and if the stochastic shows the Euro to be oversold at this point we could expect to see Euro recovery to the region of the 20-day moving average, with the upper Bollinger band as the outside limit.

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