EURUSD (week: 26-30 Sep. 2005)

Last week the pair managed to recover some of its losses and reach slightly above 1.2280, only to revert its course later and go down sharply below 1.2100, ending the week in the 1.2030 zone.

Fundamentally, the aftermath of hurricane Katrina and growing concern on its impact on short-term economic indicators in the US could account for the EUR relative strength at the beginning of the week, while the FOMC decision on Tuesday to raise rates to 3.75% should be seen as the major catalyst pinpointing the USD subsequent gains.

Technically, on the 4h chart above we can see that the pair only spiked above 1.2225, the 50% retracement of the move from 1.1872 to 1.2587. On medium term we see the EUR losing even more ground in favor of the greenback, but we also expect a potential minor correction at the beginning of the week. We see the pair test 1.2000, major technical and psychological support, then retrace towards 1.2110, a possible 38.2 fib.retr. of the recent 1.2268-1.2000 move. Only then the major bearish trend could resume, reaching levels in the 1.1960 area.

Suggestion for swing trading: LONG around 1.2005, with a 30-40 pips SL, TP around 1.2110, then SHORT around 1.2095, with a 50 pips SL and target at 1.1985.


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