As can be seen above, the
long term pattern of EURUSD price movement would seem to support the idea that
the current upward trend in the pair might be about to reverse. Price has now
hit the descending long-term upper trend line, which is most apparent on the
monthly chart. It has been anchored to the downside by the monthly 200 period
Simple Moving Average (SMA). All of this has defined the Single Currency since
the onset of the Global Financial Crisis, which made itself felt on the Foreign
Exchange market in late 2008.
On the fundamental analysis
side, there are also signals that would support the idea that the pair could
reverse from here: Fed tapering of Quantitative Easing (QE) is happening and
will continue. With exquisite irony, as was pointed out last week, this type of
economic stimulus, which has the effect of weakening the relevant currency, is now
being actively considered for the Euro zone (QE
has entered the lexicon of the European Central Bank).
Government report revisions are important but often
ignored
While the Federal Open Market
Committee (FOMC) has signaled that it will no longer rely on employment data to
the exclusion of all others, the job numbers still have to carry a lot of
weight in their deliberations of when they will start to raise interest rates.
It now turns out that, after revisions, what were perceived to be soft
employment figures, and attributed to severe weather conditions in the US , were
nothing of the sort. Employment growth has been proceeding apace throughout the
first quarter of 2014. However, it would seem that the revisions never get
anything like the kind of attention the initial report receives when it is
announced.
The
sale of treasuries is also under way (meaning a rise in short term yields),
which is another harbinger of a stronger US dollar. And last Friday, what might
be the first signs of a retreat from equities by the smart money could have
been seen, with a late-day drop in US stocks, particularly those in the tech
sector. If this continues it will mean that equity traders as well have woken
up to the reality of the end of the cheap money era in the USA .
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