Saturday, June 5, 2010

The Euro Breaks Down (Again), Below $1.20

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The Euro/US Dollar currency cross broke through and closed below $1.20 on Friday, June 4.  The Euro Crisis continues as can be seen on the EURUSD daily chart below.

There are a variety of opinions as to the ultimate fate of the Euro - from extinction to survival.  Many think Euro parity with the US Dollar is inevitable (Euro = $1.00 USD).  This does seem probable.  There is no investor confidence in the European Union, the Euro, and the European financial system presently.  Until there is confidence, or at least some hope, the Euro cannot rally and therefore strengthen.

Since there has been volumes written on the European Crisis, I previously posted economist Nouriel Roubini's summary and conclusions of the EU Crisis here.  His basic conclusion is "In my view, it's not over".


Below is the EURUSD daily chart since the Euro closing peak and high on November 25, 2009:


As can be seen from the daily chart above, it's been a long downhill slide for the Euro versus the US Dollar.  The yellow downtrend line, a rate of price descent, is from the November 25, 2009 closing high and peak of 1.51100 down through the April 13, 2010 closing high and peak of 1.36599.  The Euro has stayed below, and recently well below, henceforth.  The Euro is down -20.80% from the November 25, 2009 peak.

The yellow horizontal line is the Friday, May 7, 2010 close of 1.27507.  This is a benchmark price as the EU, ECB, and IMF announced the "EU Bailout" on Monday, May 10.  The Euro initially rallied on this bailout news, only to subsequently continue descending by -6.15% to date.

The severity of the Euro price weakness can be seen on the moving averages.  The Euro has been below the 25 day simple moving average since April 18 and mostly below since the peak on November 25, 2009.  The Euro has been below the 50d sma since April 15 and consistently below since the November 25, 2009 peak.  The Euro has been below the 100d sma since December 11 and below the 200d sma since January 14, 2010.

The RSI 14 day is 35.07 indicating oversold and the RSI 28 day is 30.07 also indicating oversold conditions. The MACD (12,26,9) is surprisingly bullish since May 21, but downtrending.  The MACD recovered due to the consolidation trading, and small rallies, from May 16 through June 3.  Some have speculated that the European central banks, and perhaps other countries, defended the Euro during this time period.  This seems probable and now possible the Euro got away from them on Friday.



Euro/Yen

Some analysts are saying the Euro/Yen (EURJPY) cross is actually the currency cross to watch.  Below is the daily chart for the EURJPY since October 23, 2009 for comparative purposes.  Overall the chart is similar, but there has been more EURJPY consolidation recently, compared to the EURUSD.  The Euro had several peaks and highs versus the Japanese Yen in 2009: June 5 and 12, August 7, and October 23.  The August 7 closing peak was the highest close at 138.33. The October 23 closing peak of 138.121 was the last gasp before the ongoing descent and bear market for the Euro.


The Euro peaked earlier against the Yen, on October 23, 2009 versus the US Dollar on November 25, 2009.  As can be seen from the daily chart above, it's been a long downhill slide for the Euro versus the Japanese Yen, same as versus the US Dollar.  The yellow downtrend line, a rate of price descent, is from the October 23, 2009 closing high and peak of 138.121 down through the recent April 2, 2010 closing high and peak of 127.712.  The Euro has stayed below, and recently well below, henceforth.  The Euro is down -20.45% from the October 23, 2009 peak and last gasp.  This is the same as the -20.80% decline for the Euro/US Dollar since November 25, 2009.

The yellow horizontal line is the Friday, May 7, 2010 close of 116.776.  This is a benchmark price as the EU, ECB, and IMF announced the "EU Bailout" on Monday, May 10.  The Euro initially rallied on this bailout news, only to subsequently continue descending by -5.91% to date.  This is the same as the -6.15% decline for the Euro/US Dollar for the same time period.



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