{"id":3254,"date":"2009-08-07T10:38:20","date_gmt":"2009-08-07T15:38:20","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=3254"},"modified":"2009-08-07T10:38:20","modified_gmt":"2009-08-07T15:38:20","slug":"eurusd-tanks-on-reversal-in-correlation","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2009\/08\/07\/eurusd-tanks-on-reversal-in-correlation\/","title":{"rendered":"EUR\/USD Tanks on Reversal in Correlation"},"content":{"rendered":"

By Fast Brokers<\/strong> – The pullback in the EUR\/USD is faring worse than we expected.\u00a0 The currency pair is sinking quickly below our 1st and 2nd tier uptrend lines and is currently headed towards previous August lows.\u00a0 The EUR\/USD\u2019s brisk decline is part of a broad-based appreciation of the Dollar in reaction to better than expected employment data from the U.S.\u00a0 The Dollar\u2019s broad strength is confirmed by a breakout in the USD\/JPY.\u00a0 The currency pair is normally dormant, so today\u2019s movement should be on everybody\u2019s radar.\u00a0 The fact that the EUR\/USD isn\u2019t rising on the news is suspicious, and raises a red flag.\u00a0 Yes, German Industrial Production missed expectations this morning, but one discouraging data point surely isn\u2019t enough to send the EUR\/USD tumbling like this.\u00a0 The Industrial Production number is simply heightening the pullback.\u00a0 So what message is the EUR\/USD sending?\u00a0 Are we witnessing a shift in correlation between the Dollar and U.S. equities?\u00a0 While it\u2019s certainly too early to make any conclusions, the discussion is at least warranted.<\/p>\n

We can derive a few reasons behind today\u2019s rapid appreciation of the Dollar in the wake of encouraging U.S. employment data.\u00a0 Either we are witnessing a reversal in correlation, or the EUR\/USD is indicating a sizable pullback in U.S. equities.\u00a0 The answer could come from the S&P\u2019s reaction as holds strong just above its highly psychological 1000 level.\u00a0 A reversal in correlation could be a key development.\u00a0 This would indicate investors believe the U.S. economy should outperform both the EU and Britain on a fundamental basis.\u00a0 Since the large pullback in the EUR\/USD comes in reaction to much better than expected U.S. data combined with recent disappointing EU data, the reversal in correlation is a more plausible argument.\u00a0 However, like we said, it\u2019s too early to jump to any conclusions about today\u2019s movement.\u00a0 The positive correlation between the Dollar and U.S. equities could just be out of whack today with a return to normalcy next week.\u00a0 We will have to wait and see how U.S. equities behave in relation to the Dollar over the next few trading sessions.<\/p>\n

Meanwhile, today\u2019s decline in the EUR\/USD comes on large sell-side action, indicating there is weight behind the movement.\u00a0 Despite today\u2019s deterioration, the EUR\/USD still has our 1st tier uptrend line and August lows to fall back on.\u00a0 If these cushions don\u2019t hold, the currency pair can rely upon the bottom of its 7\/20-7\/28 trading range with the psychological 1.40 relaxing in the distance.\u00a0 Investors will need to keep a close eye on the EUR\/USD as well as the S&P futures to see where the currency pair can bottom and build a new base.<\/p>\n

Present Price: 1.4233<\/p>\n

Resistances: 1.4252, 1.4278, 1.4294, 1.4324<\/p>\n

Supports: 1.4225, 1.4214, 1.4200, 1.4168, 1.4152<\/p>\n

Psychological: 1.40<\/p>\n

\"\"<\/a><\/p>\n

Market Commentary<\/strong><\/em> provided by Fast Brokers<\/strong><\/span><\/a>.<\/p>\n

Disclaimer:<\/strong> FastBrokers\u2019 market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell\/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.<\/p>\n

Risk Disclosure:<\/strong> There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Fast Brokers – The pullback in the EUR\/USD is faring worse than we expected.\u00a0 The currency pair is sinking quickly below our 1st and 2nd tier uptrend lines and is currently headed towards previous August lows.\u00a0 The EUR\/USD\u2019s brisk decline is part of a broad-based appreciation of the Dollar in reaction to better than … <\/p>\n

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