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Euro to Dollar Analysis 8 July 2010

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Euro to Dollar Chart July 2010

The euro to dollar is trading at an interesting price level having recovered from the lows of last month where we saw the pair touch USD1.1876 and end the month as a long leg doji candle.  As such this reversal signal has duly been validated by early trading so far in July with the pair currently moving back above USD1.25 to trade at USD1.2651 at time of writing.  The question, of course, is whether this is merely a short squeeze higher or a longer term change in sentiment for the euro to dollar.

The general consensus amongst market professionals and analysts is that the euro is precariously balanced between recovery and destruction but in the main this is simply seen as a short term bounce higher before the longer term downwards trend continues in the pair, and indeed some analysts are even predicting a move to parity as early as next year.  This move to parity is fact seen as positive for the eurozone and possibly factor in helping to generate some growth and thereby stimulate the eurozone economy as a result.

Much of the blame for the recent long term decline in the euro has been due to the carry trade with low interest rates in Europe helping to establish the euro as one of the favoured currencies for this trading strategy.  For longer term trend traders this presents an excellent opportunity for the 6 to 9 months whilst for shorter term or intra day traders the bounce higher simply provides excellent opportunities to enter short positions in readiness for the downwards move.

You can find a daily chart analysis for the eurodollar at my euro vs dollar site.

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