Thursday, July 23, 2009

DOW breaks 9000 points, suggests turnaround for EUR/USD

Today the DOW rose about 170+ points, finally braking the 9000 point barrier. For months I've been very bearish on the EUR/USD pair. I was expecting the US economy to recover much later this year (in fall). Several sources now indicate the recession is over and I think they might be right. Sooner then I expected. Time to turn the tables and look for a mid-term outlook for the EUR/USD pair. Mid-term because the Euro can't continue to rise without serious economic consequences, I believe the ECB will eventually intervene in the long term and bring the value of the already heavily over valued Euro down. Deflation is already becoming a big issue in the Euro-Zone. But that's long term talk, let's see how long it takes for the people in charge of the European monetary policy to realize that doing absolutely nothing about their, for example interest rate (that would at least be something) will hurt their economic block.
For the mid-term, I think we should start looking at targets of 1.45-1.46 for the upcoming weeks.
Here's what it looks like now; EUR/USD chart for the year so far;
This is what concerns me and only make it a mid-term trade is that despite all positive economic data from the US, the pair is since May trading in a sideways market. Shouldn't it already be trading much higher with the US economy coming out of the slums? For now we have to start looking at buying the pair with targets @ 1.44.

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