Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Brief Thoughts On the EURUSD Daily Chart: Support Levels, Ramifications

 
Note the daily chart below of the EURUSD


EURUSD DAILY CHART    16NOV29 19 O

 
USD moves largely driven by the EUR. If EU situation stays scary, EUR will continue to weaken which means USD gets stronger. Currently EURUSD sitting at around 1.3100, just above its 200 day SMA around 1.3050.
Consider Support Levels
Next serious support not until around 1.2700, so if that support zone breaks, USD moving higher about 3%

Next major support around 1.2200, meaning a roughly 6.8% drop from current levels.

After that, next support is around 1.1900 a 9% drop from current levels.
Consider Fundamentals Driving The Pair

Of course, the EURUSD is simply reflecting the level of fear/confidence based on the latest developments in the EU crisis, particularly concern that Portuguese and Spanish bond yields will continue to rise and bring them to seek EU/IMF funds, which are vastly insufficient to cover Spain.

Regarding the EURUSD the situation is very volatile. The EU not so transparent. As with Greece and Ireland, there is "absolutely no need for a bailout" for Spain and Portugal ....until suddenly, surprise, there is.

Hard to trade this short term, but over the longer term EU has more potential time bombs than the US, so trend for EURUSD s/b lower, suggesting USD moving higher.
Ramifications
Key ramifications include:
·         STOCKS: For those who believe US stocks have been driven higher by the inflation trade idea, that QE 2 would bring inflation in the USD, the developing downtrend in the EURUSD and thus strengthening of the USD is deflationary for US stocks, and would suggest further downside for US stocks as long as anxiety about Ireland, Portugal, Spain, or others, continue to dominate trader concerns.
·         COMMODITIES: A stronger USD usually means falling commodity prices, though if the EUR is weakening that alone can feed gold prices like we saw last Tuesday, as those holding Euros hedge their holdings in gold.
·         FOREX:
·         Because the USD is the chief counterpart of the Japanese Yen, a falling EURUSD could well mean a rising USDJPY and thus a falling JPY. That tends to be very supportive of Japanese stocks and the Nikkei.
·         Because the USD is a primary funding currency for the carry trade (those who sell a low yielding currency like the USD to fund purchases of higher yielders like the AUD and NZD) expect the AUD and NZD to also come under pressure.
DISCLOSURE & DISCLAIMER: AUTHOR SHORT EUR FOR PERSONAL PORTFOLIO, THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER