Those of you who have been following this blog for a while should be familiar with my view that the currency world has been rather erratic of late. Many of the majors are in trading range market without any clearly defined trend.
The Euro is no exception. It has been contained in a range bounded by 1.370 on the top and 1.350 on the bottom for the last 6 weeks. It has begun moving lower towards the bottom of the range this week however and is setting up therefore for an important test.
I have felt that the European Monetary Authorities are not comfortable with the Euro near the 1.40 level in relation to the Dollar. That was made abundantly clear by Draghi's talking down of the currency in early May when he first broached the topic of lowering interest rates and potential forms of monetary stimulus that might be employed by the ECB to get the Eurozone economy moving.
Traders took their cue from him and responded by selling the unit. However, the bears have as of yet been unable to take it down below 1.35 for some time now. This level is once again proving to be a key chart level that should be monitored.
Neither of the indicators noted are near their respective oversold zones so IF (and this is unknown ) the Euro can break below that zone, it has the room to run down another full point initially and perhaps as low as 1.330. If it does, it will confirm a trending move as it will have broken out of its range trade.
Time will make it clear.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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