Tuesday July 27, 2010 - 19:23:10 GMT
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Forex Hound - www.forexhound.com
Euro Weakens as Drop in Consumer Confidence Drives Investors to Dollar
After piercing a minor .618 retracement
level this morning, selling pressure hit the Euro after U.S. Consumer
Confidence fell more than analysts had estimated. The report pressured equities
and drove down demand for higher risk assets.
Todayâ€™s action is significant because it
shows that investors have set aside worries about the European bank stress
tests and are now turning their focus toward economic reports. Traders seemed
reluctant to go long this morning after the U.S. reported a slight gain in home
prices and amid improved corporate earnings. This represented a shift in
sentiment as earlier in the month investors chased the Euro on both good and
bad news for the Dollar.
The housing report in particular was
interesting because it gave hope that the housing market may be improving
although at a slow pace. Although reports have been confusing to investors
lately, todayâ€™s break looks as if buyers just gave up on the long side of the Euro
or they are making up excuses to take profits. Todayâ€™s break also demonstrates
the strong correlation between the Euro and U.S. equity markets at this time.
Technically the Euro is in a position to
form a daily closing price reversal top. This could lead to the start of a 2 to
3 week break if confirmed.
The break in the U.S. equity markets is also leading
to profit-taking in the higher risk currencies. All three major asset-linked
currencies â€“ Australian Dollar, New Zealand Dollar and Canadian Dollar â€“ are in
positions to post closing price reversal tops. If sentiment is turning bearish
on risk then look for the start of a correction in these three markets.
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