Wednesday October 13, 2010 - 13:27:52 GMT
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Forex Hound - www.forexhound.com
Euro Poised to Test 1.4028 Top
The EUR USD has been on a tear since early Tuesday afternoon
shortly after Federal Reserve policy makers gave further indications that they
were ready to implement another round of money-creating stimulus.
The rally in the Euro was triggered after the Fed released
its September minutes which showed several members wanted to resume buying
large amounts of long-term government bonds soon. Previously the Fed had hinted that this
latest round of quantitative analysis would take place before long. Changing
the language from â€śbefore longâ€ť to â€śsoonâ€ť indicates that there is a sense of
Technically the Euro has been the main beneficiary since the
release of the Fed minutes, outpacing all of the other major currencies to the upside.
Overnight this market regained a major .618 retracement level at 1.3896 putting
it in a strong position to rally further.
Standing in the way of a test of the recent top at 1.4028 is
a long-term downtrending Gann angle from the 1.5144 top at 1.4004. This angle
stopped the rally late last week, but that was when conditions were overbought
and traders were concerned about the upcoming U.S. employment report. Now that
all of those conditions are out of the way, the Euro is likely to attempt to
break out above 1.4028 to reaffirm its strong uptrend. If this occurs, then a
new main bottom will be created at 1.3775. The main trend will turn down if
this bottom is violated.
Adding additional support to the strength in the Euro was
the news that German Bundesbank President Axel Weber said the European Central
Bankâ€™s bond-purchase plan, which bought around 63 billion Euros ($87 billion)
of Euro-Zone government bonds on the secondary market since May, â€śshould be
phased out permanentlyâ€ť.
This statement sums up the current situation between the
Dollar and the Euro. The Fed is still considering additional quantitative
easing while the ECB is getting ready to exit this strategy.
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