Euro Dollar Pair Has Come Full Circle This Week

Includes: FXE, UDN, UUP
by: Ralph Shell

This pair has come full circle this week. The early week bears, confident in their positions when the market was under 1.41, got blown out on a rally that carried this pair above 1.4350. Early week trading seemed to focus on the Shanghai Composite Index, which had been selling off, but by the end of the week rallies in the DAX, the FTSE, and Dow took center stage. Granted we had some good fundamental numbers serving as a back drop for the equities rally. German and French manufacturing and services indexes both came better than expected, as did the US Home Sales Report. The European reports took out the last vestages of resitance between 1.4260 and 1.43, and the US report took the pair even higher, cleaning out stops as the market raced to 1.4375. It was a little difficult to understand how the bullish EURO economic news was bullish on the EURO and the bullish US housing numbers was also bullish the EURO.

We have since backed off from the highs and are trading under 1.4300. Barring unforeseen week end negativity, it looks like the market is set up for a retest of the highs above 1.44. Perhaps Warren Buffett, Bill Gross and their friends will continue trash talking the dollar, setting the stage for a new 2009 Euro.