Majors Signal Reverse
Posted on February 25, 2008
Filed Under Fundamental Analysis, Major Crosses |
Currency markets at the moment are either flat or frenetic. It wasn’t until Thursday that both the euro and pound decided to reverse and start the climb back to 1.50 and 2.0 respectively.
In the case of the pound the reverse in fortune was attributed to better than expected retail sales, thereby restricting the BOE’s scope for a cut in interest rates next month. From a charting point of view the pound needs to have a weekly close above 1.98 before we can say for sure that it stands a chance of returning to the 2.0 level. There are also plenty of other currencies to buy against the dollar before the pound.
The rise in the euro followed further poor US economic data but we wont know if the climb will be sustained until release of the German IFO numbers tomorrow and the market has picked over speeches from Trichet. The Information and Forschung (Ifo) Business Climate Index measures the mood of firms in manufacturing, construction, wholesale and retail. The index is derived from a monthly survey of over 7,000 firms where respondents are asked to give their assessments of the current business situation and their expectations for the next six months. Taken with data from the ICC (International Chamber of Commerce) should give the market an indication of when the ECB is likely to start cutting interest rates to avoid a major slowdown.
Despite the above the euro dollar chart is very clear. This is the euro’s fourth attempt at the 1.50 level so it really is a case of now or never. However, my own view has always been that despite the chart it will be pressure from inside the eurozone which will eventually determine whether the euro will continue to strengthen.
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