Euro Poised to Test 1.4028 Top

The EUR USD has been on a tear since early Tuesday afternoonshortly after Federal Reserve policy makers gave further indications that theywere ready to implement another round of money-creating stimulus.

The EUR USD has been on a tear since early Tuesday afternoonshortly after Federal Reserve policy makers gave further indications that theywere ready to implement another round of money-creating stimulus.

The rally in the Euro was triggered after the Fed releasedits September minutes which showed several members wanted to resume buyinglarge amounts of long-term government bonds soon. Previously the Fed had hinted that thislatest round of quantitative analysis would take place before long. Changingthe language from “before long” to “soon” indicates that there is a sense ofurgency.

Technically the Euro has been the main beneficiary since therelease 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 puttingit in a strong position to rally further.

Standing in the way of a test of the recent top at 1.4028 isa long-term downtrending Gann angle from the 1.5144 top at 1.4004. This anglestopped the rally late last week, but that was when conditions were overboughtand traders were concerned about the upcoming U.S. employment report. Now thatall of those conditions are out of the way, the Euro is likely to attempt tobreak out above 1.4028 to reaffirm its strong uptrend. If this occurs, then anew main bottom will be created at 1.3775. The main trend will turn down ifthis bottom is violated.

Adding additional support to the strength in the Euro wasthe news that German Bundesbank President Axel Weber said the European CentralBank’s bond-purchase plan, which bought around 63 billion Euros ($87 billion)of Euro-Zone government bonds on the secondary market since May, “should bephased out permanently”.

This statement sums up the current situation between theDollar and the Euro. The Fed is still considering additional quantitativeeasing while the ECB is getting ready to exit this strategy.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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