By: Sara Patterson
The Euro has hit it lowest point against the US Dollar since last February. As we all know, the Eurozone is facing many economic difficulties, which is pressuring the currency against the US Dollar.
By looking at the last actions for this pair, we can see through the daily graph (shown below) that the pair is facing a strong support zone from a technical analysis view, as we can’t ignore the formation of “MACD Convergence”. On the 5th of October 2011, the Euro reached 1.3175 forming a low level (point 1) and on last Friday, it reached 1.2920, hence forming a lower level (point 2). On the other side, the MACD formed a low point on October 5, 2011, and a high point on last Friday (see graph).
All these signs point to the formation we have mentioned of the “MACD Convergence”, which usually leads to the reverse of the currency’s strong decline and sends it up.
In other words, if there is no new data or press releases from the Eurozone, it is likely that the Euro will rebound again to 1.3250 in the long run.
From another view, we can also notice that the Euro has broken through the trend shown in the below graph (the gray line) at point 2. Since this is a support line, we can see that the Euro reached to 1.3170 at point 1, and then rose up again.
The Euro then rose once more to the support line (point 2) and reached the value of 1.3220, and bounced back up again, but not for long, as it went back and broke through the trend line at the same point as shown in the graph. Usually, when the trend line is broken, the market responds and retests it again. Since the trend line was expressing a strong support level for this pair, it is expected that the market will retest it after breaking through it, and raise up until it reaches to that level to confirm the change of direction and converting it to a resistant point that cannot be ignored.
In other words, and as mentioned above, the Euro is expected to rise against the US Dollar until it reaches 1.3250 again, before it resumes its decline.
