EUR/USD

Revisiting yesterday's EUR/USD wedge and the GBP/CHF retracement analysis we see how our support/resistance levels have held, although it is has been a relatively quiet market from what we have experienced the last few months. On the EUR/USD the support trendline has held, but it's interesting to note the pair has been unable gain a bid even with some mild equity strength, suggesting perhaps that the strong EUR/USD equity correlation could be weakening. The GBP/CHF has also failed to penetrate the 38.2% retracement and has traded lower as a quiet market has not affected the demand for the risk averse Swissy.

Looking at the EUR/USD pair on an hourly chart, with the wild price action over the last few trading sessions, we see a new wedge develop with a much steeper support slope than the one on the resistance side. The creation of the wedge was assisted by the equity rally last Thursday (11/13) creating the second hit on the topside, followed by the gap opening lower yesterday which helped create the support slope (both moves are noted below.) The third downside move today was also supported and we will now be looking for a short-term move to the upside from the support line, possibly to resistance?

With equities continuing lower worldwide, Euro-Zone Industrial Production continuing to weaken, compounded with rising unemployment and the negative macroeconomic sentiment against the EUR it is not surprising we are trading lower today. Looking at the "wedge" from yesterday, we see the pair has broken the support line south but has not hit the lows. We will now look for the former support line to provide some resistance as the pair could retest the lows.

The EUR/USD pair is trading lower this session after equities traded lower around the world to start the week, on lower volume with the US Holiday today and with oil prices hitting lows we have not seen in well over a year. Looking at a revised 4-hour wedge formation for the pair, we see a secondary low established with a second touch on the support line and three touches on the resistance trendline. We are also paying attention to the 100 4-hour moving average providing some resistance as the pair trades south. Look for the trendlines to provide the first barrier of support and resistance; while the recent highs and yearly lows could provide secondary support/resistance.

Revisiting last weeks EUR/USD triple touch wedge chart before the release of the Non-Farm Payroll, we see the pair consolidated following the release of a number which was much worse than expected for October (-240K vs. -200K) and revised much worse for September (-284K vs. -159K) with equity markets subsequently surprising some with a positive reaction. One possible reason for this seemingly contrary approach is that Unemployment is a lagging indicator. Thus, with worse than expected numbers already being filtered through the system for prior months (Sept/Oct), the market is beginning to see reports that are worse than expected come through the system sooner than expected, indicating the recovery could be closer than previously expected. We will continue to look for the pair to range in this closing triangle, until more information or another dynamic comes in to play.

Looking at this three touch hourly downward trendline on the EUR/USD pair, which has been trading down with equity prices, we see some short-term resistance developing. If the wedge displayed below holds, we could see some consolidation for the pair, along with equity markets following the release of the Non-Farm Payroll number during the NY morning. (to be released at 8:30 am est.)

With US equity markets selling off by over 5% and the Nikkei following suit, we see the USD rallying against the European pairs. Looking at yesterday's EUR/USD retracement analysis from the 10/28 low to the 10/30, we see the pair about to hit the 100 hour moving average and 50% retracement level. We will look for these levels to provide some support in what appears to be a ranging market that is lagging equities.

As EUR/USD appears to be maintaining somewhat of a bid following worldwide equity rallies, it still does not seem to be able to gather enough steam to break the negative outlook for the currency. After a strong rally during yesterdays session, the pair is currently straddling the 38.2% retracement level (using the 10/28 low - 10/30 high) on our hourly analysis. We will continue to look for the 0% barrier (1.3294) to act as resistance and the ~1.2331 as a short term target. The moving averages could provide some support as the pair continues to trade in a wide range.

In a relatively quiet Asian session, at least quiet by recent standards, the Euro has made new yearly lows against the USD, trading at the 1.2329 level. Reviewing a weekly retracement analysis from the November 2000 lows to the July 2008 high, we see the next two retracement targets become more of a reality. It is somewhat surprising the pair made new lows with Asian equity markets hovering around the unchanged mark and no significant Euro related news.

Reviewing our old EUR/USD weekly retracement analysis from the October 2000 lows (exactly 8 years ago) to the July 2008 highs, we see the pair touched the 38.2% retracement level as we had expected (during NY trading) and proceeded to trade around that level throughout NY. However, as Asian markets begun to open the USD continued to gain strength against the EUR, even though US markets had returned some of their recent gains (DJIA -231). There seems to be a fundamental breakdown in regards to the EUR currency and we will now be looking for the 50% and 61.8% retracement levels as the next targets. It is important to note that the 38.2% retracement came into play after the pair broke the 200 week moving average (~1.3350) for the first time since July of 2002.