Monday, September 23, 2013

The breakout and the uptrend

Our chart this morning might look a little busy, but it is worth paying attention to. It shows the strong relationship between the presence or otherwise of Quantitative Easing (QE) expectations in the USA and the exchange rate between the Euro and the US dollar. It also shows that indications of the possibility that tapering might not actually take place, after the last FOMC meeting, were already in the public domain since July. Yet the widespread expectation that tapering was to be announced at that meeting somehow took hold.

On the technical analysis side, this pair is now firmly trending upward (higher highs and higher lows indicate a trend), after a breakout from the channel that had been formed previously. How long it will last, or how high this trend has to go remains to be seen. We might have to wait for the next Non-Farm payrolls report on October 4th next to get new news.

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