Thursday, September 25, 2014

Forex: Euro Hate, Dollar Love Goes Extreme

The Euro was trashed again today as the Dollar jumped. Multiple signals are showcasing a near term bottom on the Euro and a top on the U.S. Dollar. Please note, near term means a bounce in the Euro and a fall in the Dollar for 1-2 weeks, then a resumption of the current trend.

1. Sentiment has swung wildly to the bearish side on the Euro and bullish side on the Dollar. This is a recent extreme and usually signals a switch in momentum.

2. The Euro is into major support on the daily chart. This can be seen in the first chart below.

3. The Dollar is coming into major resistance on the daily chart.

4. Both charts have maxed out their extension moves from the 200 moving averages. This signals a retrace of the move before the move can continue.

5. The Euro and Dollar are already showing a potential reversal today. Should the Euro climb to the flat line and the Dollar fall to the flat line, look for the bottom/top to be in.

Gareth Soloway
Chief Market Strategist