Euro Falls to Six Month Low
A report released today shows that German business confidence dropped further than economists expected, pushing the euro to a six month low against the dollar.
Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut said “the market is coming around to the view that the extremely high level in the euro-dollar is not justified.” - Bloomberg
The euro fell 0.8% from $1.4754 yesterday, to $1.4633 today. The euro has lost over 8% since it hit an all-time high against the dollar on July 15. Some experts feel that the euro will continue to be under pressure with plateauing oil prices and continued weakness in the European economy.
Technical Chart: EURUSD 1-hour
From today’s 1-hour chart for the euro/dollar we can see that the price action is in a downtrend favouring the dollar. The price action is sitting within a descending channel of support and resistance.
However, interestingly the stochastic paints a slightly different picture. The price action has shown lower highs, whereas the stochastic shows higher highs as shown by the rising resistance line. This tends to suggest we have divergence as the market strengthens. We could see some temporary recovery for the euro. However, fundamentals are pointing towards prolonged euro weakness.
Weighing up the fundamentals helps to filter the noise. If we see a break above the resistance line, we could see recovery. However, if the price continues within the channel we could look for a sell signal to pick up profit on the dollar strengthening.
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