Euro Appears Vulnerable to Downside

Most majorForex markets are trading in tight narrow ranges following the expanded rangetrade on Friday triggered by the release of the U.S. Non-Farm Payrolls report.With Non-Farm Payrolls coming in well below pre-report guesses and theUnemployment Rate dropping unexpectedly, on the surface the report appeared tobe bearish for the Dollar, but the response by the U.S. Treasury markets seemsto be indicating the opposite.

Most majorForex markets are trading in tight narrow ranges following the expanded rangetrade on Friday triggered by the release of the U.S. Non-Farm Payrolls report.With Non-Farm Payrolls coming in well below pre-report guesses and theUnemployment Rate dropping unexpectedly, on the surface the report appeared tobe bearish for the Dollar, but the response by the U.S. Treasury markets seemsto be indicating the opposite.

U.S.Treasury yields soared to their highest level in more than nine months onFriday. Higher yields will make the Greenback more attractive to foreigninvestors. This could pressure currency markets especially the Euro and theJapanese Yen.

FrenchFinance Minister Christine Lagarde is making headlines this morning because ofan article in The Wall Street Journal stating her concerns about the perceptionof a strong Euro given the weak U.S. Dollar and Chinese yuan. She blamedglobal-exchange imbalances and implied that the Euro was a victim because ofthe Dollar and the Yuan. She is looking for international monetary systemreform to prevent the Euro from strengthening due to deliberately weakcurrencies. A strong Euro may hurt trade because it makes European goodsrelatively more expensive when compared to U.S. and Chinese goods.

Following a.618 retracement of the 1.2873 to 1.4282 range to 1.3861, the Euro has beenunder pressure. Some analysts are trying to build a case for a short-term headand shoulders formation, but this analyst feels there is not enough informationto make this call. Instead the focus should be on the basic swing chartformation. Simply stated, the trend has turned down since the last swing bottomat 1.3570 failed to hold. Although the Euro did not accelerate to the downside whenthis price was penetrated, it looks as if it is beginning to look vulnerable.

Based onthe rally from 1.2873 to 1.3861, traders should watch for the start of acorrection back to 1.3367 to 1.3250 over the near-term. This morning the Eurois straddling a 50% price level at 1.3577. Once the market clears this leveland the swing bottom, look for longs to throw in the towel and for shorttraders to begin pressing the Euro.

For furtherinformation on this and other Pattern, Price & Time products visit ourwebsite at www.patternpricetime.com

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

Disclainer: