Euro-Dollar Will Weaken Further to $1.25: Charts

The short-term gyrations of Portuguese tinkering, Irish blarney, Italian bluster, Greek debt and the care-free Spanish (PIIGS) have a cumulative impact of the euro-dollar relationship.

The weekly euro-dollar chart gives a better view of the strategic perspective. Against this chart we must also balance the degree to which the greenback's strength, as shown on the U.S. dollar index, is increasing the pressure on the euro as distinct from pressure applied by the Euro zone PIIGS.

A simple analysis of the Euro-Dollar chart has these features.

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• Multiple confirmations that $1.25 is a key support area
• A double bottom rebound from near $1.25.
• An overshoot on the double bottom “W” pattern targets. The pattern target is near $1.47 and the rebound high was at $1.50.
• A strong downtrend line starting from the December 2009 high. Subsequent rallies have retreated from this trend line.
• Minor support/resistance near 1.37. This is a recent consolidation area. The Euro has been clinging to this level, using it as a resistance level. Lose its grip on this level, and the next support level is down at 1.25.

This analysis is simple and effective. The conclusion is that the downtrend is likely to continue and set a downside target near $1.25. Read more