Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Eur/usd Is At Key Support-Line

Monday, 21 May 2012

Eur/usd Is At Key Support-Line

The euro is under pressure. However, short positions held by futures funds are again at the extreme levels. In the past, they anticipated important turning points. What could happen to the U.S. markets?

The euro decline is limited?

Eur/usd is reaching an important technical level at 1.26. It corresponds to the support line of the past two years. It should hold at first, considering futures funds are again massively short the European currency, according to the latest COT report. It happened in January 2012 and in May 2011, when the market rebounded from the lows.  A decline below 1.2490 could instead target 1.2250/1.20.
In effect, financial markets should remain volatile until mid June. Greece will then hold the new political elections, which should finally signal the intention of the country to stay or leave the euro zone. The financial community does not want Greece to exit. Huge losses for the European institutions, as well as the default of Greece financial system, will be the consequence of the country leaving the euro zone. Nonetheless, it could be only a matter of time for Athens to go solo. In fact, the cost of keeping the Union together will be massive over the longer-term as well. The study of cycles anticipates the euro reaching an important top between 2013 and 2015.
Stocks could soon bottom?
Growth and jobs should have the precedence over austerity. This is the most important message coming from the G-8 summit in Camp David. As a result, the possibility of another quant easing in the U.S. is a real possibility, which could limit the decline of the euro/usd. We can not also forget the debit stays huge. Finally, the U.S. current account has increased and help from foreign countries is needed. Nevertheless, financing from China and Japan is drying up. The S&P 500 index is about the reach the important support line at 1280. The next target could eventually be 1240. Nevertheless, the decline of stocks might be limited, considering crude oil prices are retracing from the highs and the decline should persist over the medium-term.
Angelo Airaghi,

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