Forex Investment and Currency Trading

EUR fundamentals are poor. As the economy slows rapidly, interest rates must fall further for much longer and short end rate spreads move further against it. The exposure of European banks to emerging markets is another concern, bigger than US exposure in Asia and Latin America and much bigger in emerging Europe, where countries like Hungary bring global crisis within EU borders. Also worry about structural EUR weaknesses. One currency with multiple fiscal policies is a crack in the foundations that only matters in times of acute stress – like now. The ‘Most Ugly’ global FX baton has already passed [...]

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Short Term (3-6 months): OVERWEIGHT
The near-term outlook is likely to see the Euro range-bound against the US-dollar not far from the historic highs for the single currency posted in late-April (around 1.60). The US Federal Reserve has signalled an increased concern at US dollar weakness, highlighting its role in lifting US inflationary expectations. This theme may also be reflected in stronger G7 warnings on the undesirability of new USD weakness. Against this backdrop, market does not expect the dollar’s trade-weighted value to make new 2008 lows. Whilst the ECB looks set to lift its key refi rate, developments in Euro-zone cyclical indicators [...]

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EUR GBP

The appearance of bearish divergences on the daily/weekly momentum studies (e.g. 9 period smoothed RSI), coupled with the heavily overbought readings apparent on the monthly studies suggest that intermonth risk is shifting to the downside. More specifically, a move back below the .7790 level (76.4% retracement of the 1995 - 2000 decline) on a monthly close basis, would suggest that price is entering a retracement phase. A subsequent failure of the more significant .7640 support (projected channel base and minimum 23.6% retracement of the January 2007 - March 2008 advance) would confirm the major high at .7980 and provoke [...]

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