Red's Weekly Forex Update: EUR-USD pair

EUR-USD: Bulls and Bears have to watch 1.3515/25...

Month-End-Quarter-End rebalancing flows led to moderate USD buying vs. the Euro Friday. But, the 1.3400/10 level could offer short-term support as it sees an hourly Bullish Divergence as well as wave c = 1.618 x wave a.

In the chart below you see the Elliot wave count for Bulls and Bears alike. In the end it all comes down to the 1.3515/25 level as a break above there would negate the Bearish count; in Red.

Main events to watch next week:

1. This is Trichet's last ECB meeting. We here at LTN believe the ECB rate announcement next week Thursday is a lose-lose situation for the EUR-USD. If they leave rates unchanged at 1.50%, then the market may perceive that the ECB is not doing enough for the troubled EuroZone periphery, and if they cut rates by 25 bps or shock the market with 50 bps, this will lead to shrinking interest rate differentials and likely the Euro will see a deep fall. 2. As opposed to the ECB announcement for the Euro, we believe the US Non-Farm Payroll report next Friday sees the USD a winner either way. If the report comes in below consensus at +56K, we are likely to see significant risk aversion with equities selling off, leading to USD strength. But, if it comes in better than expected we believe the improving US economic outlook would take the prospects of more QE off the table, and thus a boon to the Greenback.

That said, should EUR-USD rally in the beginning of this week, We believe it makes sense to fade a rally towards 1.3475/3500, with a stop just above the prior low near 1.3525/35, in search of a move below the September low of 1.3365 and then towards the Key psych mark at the 1.3000 level over the coming weeks, an idea worth consideration yes...



Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.