Euro Trading Lower After Trichet Comments
European Central Bank president reiterated that the US currency needs keep repeating support for a strong currency. This sent the euro near to a one week low against the dollar.
The euro traded at $1.5677, near the lowest since June 25, from $1.5670 yesterday.
ECB president Jean-Claude Trichet said, “it’s very important that U.S. authorities repeat that a strong dollar is in the interest of the U.S.” - Bloomberg
UK Economy
Meanwhile the UK economy looks more shaky after leading UK building firms announce job cuts. The credit crunch appears to be hitting one sector after sector in the UK as well as the US.
Yesterday Persimmon announced 2000 job cuts, taking sector job cuts to 4500.
“Persimmon, the UK house builder, said today that it will cut 2,000 full and part-time jobs after reporting home completions had plunged by 31 per cent and revenue by 34 per cent in the first six months of this year.” - The Times
With the job sector looking vulnerable, there will likely be an increase in online job searches during the coming months. It may be a time to look for additional training, or find recession-proof (if there is such a thing) job vacancies.
Insurance Sector
With increased uncertainty in the UK and US job sectors, more and more people are considering insurance cover of some sort. This includes covering mortgage repayments, debts and loans or other types of unemployment insurance. For UK residents, Moneysavingexpert.com has many resources for finding insurance cover that will help during economically challenging times. There are also a variety of online term insurance services that can drastically cut monthly insurance payments when compared with traditional banks and insurers.
Technical Chart: EURUSD 1-hour
The 1-hour chart for euro/dollar is interesting as there is some divergence. The price action has seen lower highs, where as the 14-day RSI has shown a higher high. This suggests some strength in the market that will push the euro up against the dollar.
This trend may come to fruition, however, it may be short-lived depending on the fundamentals. Further backing for dollar strength could push the euro down further against the dollar in coming days.
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Comments
Hi Eric, you generally meet significant resistance when the numbers are in the zero’s (1.5000, 1.6000 etc). When we consider back a while, the euro hadn’t broken through the $1.5000 mark, there was significant resistance at this point. Generally speaking, new highs will meet resistance, especially with recent Fed comments that they don’t want the dollar to weaken any further. It is in the interests of Europe, the UK and America to maintain a certain amount of strength in the dollar.
It is likely that the $1.6000 region is receiving significant psychological resistance from dollar bears and a certain amount of intervention from some of the big global banks injecting money into the system to bolster the currency.
In the long run though a break through $1.6000 isn’t out of the question.
Hi Rob,
I’ve been trading the EUR/USD for about 3 months now. Do you know why 1.5900 - 1.6000 has so much resistance built up? It doesn’t seem to ever go past this point. Who would be buying USD in that area?
Eric P. Martin