16th February 2012

UPDATE

Critical failure for Euro?

Technical Fundamental

in association with

Disclaimer

Authorised and regulated by the FSA

1.6017 High

Critical failure for Euro?

Euro - U S D ollar
1.4941 High

in association with

1.3149 Low

UPDATE Technical Fundamental

1.1880

1.53 1.52 1.51 1.50 1.49 1.48 1.47 1.46 1.45 1.44 1.43 1.42 1.41 1.40 1.39 1.38 1.37 1.36 1.35 1.34 1.33 1.32 1.31 1.30 1.29 1.28 1.27 1.26 1.25 1.24 1.23 1.22 1.21 1.20 1.19 1.18 1.17 1.16 1.15 1.14 1.13 1.12 1.11 1.10 1.09 1.08 1.07 N ov D ec 2012 Mar Apr May

WEEKLY CHART
The market has completed a clear H&S continuation pattern. The minimum target is down as far as 1.13. The initial breakdown has been followed by a classic retracement to the Neckline. That neckline resistance looks to have held. But has the market returned to the bear tack?

Jul Aug Sep

N ov D ec 2010

Mar Apr May Jun Jul

Aug Sep

N ov D ec 2011

Mar Apr May Jun Jul

Aug Sep

Euro - U S D ollar

Diagonal from June 2010 low

Neckine
38.2%

1.3320 High

1.3149 Low

38.2% 50.0% 61.8% 1.2879 High

1.2628 Low

1.435 1.430 1.425 1.420 1.415 1.410 1.405 1.400 1.395 1.390 1.385 1.380 1.375 1.370 1.365 1.360 1.355 1.350 1.345 1.340 1.335 1.330 1.325 1.320 1.315 1.310 1.305 1.300 1.295 1.290 1.285 1.280 1.275 1.270 1.265 1.260 1.255 1.250 27 March

DAILY CHART
The recent rally back to the Neckline had a weak diagonal support which has already broken. It also has a series of Fib supports. We appear to have stopped at the 50% retracement. But this is weak support, since it doesnt coincide with any other level, and there is good support beneath at the 61.8% coincident with the 1.2879 High. All in all, there is a lack of truly compelling reversal evidence.

Disclaimer

12 Septem ber

19

26

3 10 October

17

24

31 7 14 N ov ember

21

28

5 12 D ecember

19

26

2 9 2012

16

23

30

6 13 February

20

Critical failure for Euro?

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FUNDAMENTALS: The Dollar has been correcting against the Euro for several weeks driven by the belief among traders that Greece would agree a deal with her private creditors, secure the next tranche of rescue money and so avoid a messy default. After weeks of negotiation the Greek government finally reached agreement with the countrys private creditors and despite widespread rioting/protesting in Athens and other cities, passed through Parliament the austerity legislation demanded by the Euro zone finance ministers, led by Germany. Ah, you might then say, crisis over: Greece is saved there is no default and the Euro is saved from destruction. But that isnt the end of the matter. The Euro zone ministers were not convinced Greece would live up to her end of the bargain. Before releasing any money they want Greece to account for every penny she claims will be saved due to the austerity terms and the resultant delay in paying the rescue funds, risks pushing Greece into default. This latest condition took traders by surprise and the Euro sold off. Meanwhile US data continues to show growing strength. Only today Jobless claims fell below another psychologically important level; 350k, to stand at 348k pointing to yet another pick up in US job creation.

UPDATE Technical Fundamental

Moreover housing starts beat consensus and although Industrial production fell short of expectations the Fed stands ready to do more if needed, but increasingly a view is developing that they may not have to.

Critical failure for Euro?

FUNDAMENTALS: CONTINUED
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So where now for Dollar/Euro? That obviously depends on two factors: 1. The strength of the US economic recovery, and 2. Developments in the Euro zone debt crisis.

UPDATE Technical Fundamental

Of the two, we judge the debt crisis remains the more powerful dynamic. While a strengthening US economy is undoubtedly good news for the Dollar, the main concern among traders is what fate awaits the Euro zone and the Euro, so each new development has a direct impact on the strength of the Euro. What then happens now, does Greece get the rescue funds she needs or are we to witness a default? We judge a Greek default cannot be ruled out. The Euro zone finance ministers, led by Germany, seem to move the goal posts every time Greece appears to meet the previous set of conditions. We think this is because the Germans dont trust the Greeks to live up to their end of the bargain. Also opinion in Germany remains negative towards financing the rescue of the weaker Euro zone periphery. Additionally the Greek public are hostile to the measures their government is taking in their name and seem unwilling to accept the pain a rescue involves. If Greece does default we still think the Euro will weaken, because the domino effect cannot be ruled out. So far from traders viewing the Euro minus Greece as a stronger currency they could view it as the start of the end. Can the Euro weaken from here? We judge it is highly likely but the timing isnt clear..

in association with

UPDATE Technical Fundamental

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