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Downside Momentum Could Send EUR USD to 1.3602
The Euro turned its trend to down on a break through the last swing bottom at 1.3804. The charts are now indicating that 1.3610 to 1.3439 is the next downside target zone.
Lower commodity prices had a large effect on the Euro today. Weaker crude oil which had been bought as a hedge against inflation fell as the Dollar strengthened. Gold was also down. With the Euro, crude oil and gold all posting lower closes, traders sent a clear message that they wanted to be in the Dollar. This may be an indication that this current down move is going to be more than a short-term correction.
Although most of today’s weakness in the Euro has been attributed to a stronger Dollar, some feel that the Euro can break even further if speculators stop buying it. In other words, there are rallies in the Dollar when traders increase demand for it or when traders sell the Euro against it.
The European Central Bank hasn’t really come out and said it, but it is becoming concerned about the sharp rise in the Euro over a short-period of time. This is because one of its biggest fears is that Euros will get too expensive. This would hurt exports which is a major part of the Euro Zone economy.
There may be a retracement of today’s break over the next few days, but now that the trend has turned down, traders should wait until it reaches its minimum downside objective at 1.3602 before considering the long side.
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