Technical Analysis of the Euro/USD
After a fairly strong bull run between January and April 2011, the Euro started moving mainly sideways for about four months. Towards the end of August, it started dropping and on the 2nd of September, it closed decisively below the Ichimoku Kinko Hyo cloud at 1.41940 (see Fig. 9.27(a).
Since then it has been downhill all the time, except for a short corrective run between the 11th and the 15th of September. At the time of writing (September 27th), it stands at 1.3535 – more than 1 000 points below the recent high of 1.4548 it briefly touched on the 29th of August 2011.
The underlying reason for this must surely be the lingering European debt crisis. It looks very likely that Greece will default on its debt repayments. Countries like France are heavily exposed to Greek debt, which has already resulted in two major French banks having their credit rating downgraded.
If Greece is able to honour its commitments (this time at least) we might well see a short-term resurgence in the price of the Euro. Over the medium term, prospects remain bleak though.
Returning to Fig. 9.27(a), everything shouts ‘Bear’. The price is far below the cloud of the Ichimoku Kinko Hyo and also below the blue Kijun Sen and red Tenkan Sen lines. The green Chinkou Span line is far below the price 26 periods ago – confirming that we are in a bear market right now.
Those looking for a medium term long trade should wait for the price to rise above the Ichimoku cloud again, which could be a long wait. Short traders should look for new lows below the recent low of 1.33614 before entering a trade.
CFD trading and spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary. These products are only intended for people who are over 18.