Much dollar for such a short euro, the European currency seeks to lift head

Brussels - October 23, 2008 - The euro tries to maintain the level of 1.28 U.S. dollars after touching a low since November 2006, but the strength shown by the U.S. currency is a difficult challenge to overcome at this time. Technical analysts are already in the market value of the currency Community bearish phase of a higher order. Follow the change euro / dollar in the foreign exchange section.

On Wednesday, the euro depreciated by a 2.11%. Yesterday, the fall was 1.59%. Have been the last two days of a session bassists consecutive streak that began last Oct. 16. The currency question now move on to positive ground after falling to 1.2728, its lowest level since November 2006.

"The U.S. currency continued to strengthen due mainly to the slow recovery of confidence in the financial system, which we see reflected in the gradual drop in interbank rates," said analysts from X-Trade Brokers.

These experts explain that this situation "back to" that investors see the dollar as a "refuge and with great potential for revaluation in the long term." In addition, they indicate that, given the sharp depreciation suffered in recent years, "the high probability of further decreases in rates by the European Central Bank (ECB) downward pressure on the euro."

Technical situation

The analysts point out in Bolságora Ecotrade respect the value of the euro that "the ruling at the time of restructured upward from the zone of 1.3875 confirmed what we feared, that it would continue the downward trend that began months behind in the area of 1.60 figures and, most importantly, warns that we are in a bearish phase higher order.

"Taking into account the above should be valued as a very real possibility that trading continues receding positions at upcoming dates until potential turning points that do not appear until 1.21 and 1.1650", provide these experts.

For the period choir, Bolságora notes that there is very vulnerable as any bullish reaction before they reach goals. "If there is a rebound should be considered more of an opportunity to open shorts and seize power and ensure a continual falls," recommended

Upward pace of the yen

Since X-Trade Brokers also highlighted the situation of the yen, which continues revalued to the extent that the major stock exchanges are penalized. The implied volatility of options with maturities of one month dollar-yen rises to 26% from 23%. This is an indicator of the levels of risk aversion and, to the extent that the increase of carry trade positions, would tend to unravel with the consequent rise in the Japanese currency.

The strengthening of the yen is a very bad news for the Japanese economy, as the growth of this very strongly linked to the development of exports, which are detrimental to a currency more expensive. This has been shown today data from the trade balance surplus which collapsed in September.

My Opinion

In an analysis in the time scale we see a beginning of a flag in the EURUSD, which we indicate a continuation into the fall.

Based on what we said would be an extensive tour until 1.21 or 1.15. But as I said the euro is doing a flag, so there may be some reluctance to continue falling.

But a reduction in interest rates by the ECB will undoubtedly lead to a fall in the euro.

Source: El Economista