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My Forex Investment - Divergence in the EUR / USD ....

A new week of crisis could be seen in financial markets, leading to big falls in major stock indexes in the world. Large companies and corporations like General Motors and Citibank have fallen into the stock market to new levels, suggesting to many that the crisis is far from having passed and now it's up to the market "real" sense, ie market goods and consumption, and the labor market. Many analysts who once said the worst was over, now do not venture to indicate a date or a limit of this crisis.

This is backed up by the behavior of investors who have taken refuge in the major currencies, which are the Dollar and the Yen, making the price of the Euro has fallen to levels of 2006.

Such volatility in currency markets and to have ended at a point similar to that started during the week gives us to understand that there is a certain calmness and balance ... perhaps the calm before the storm ...

Fundamental Analysis

This week the dollar was flat closing at a price of 1.2582 dollars per euro, 1.2594 against the last week. As mentioned once high correlation with the dollar price of oil remains in force and, to fall in the price of oil has continued Sidon and unrelenting pointing the way for a stronger dollar.

However, they begin to hear voices that indicate that the fall of the Euro should be coming to an end, because the falling price of oil at some point should have a significant rebound when she begins to feel the demand for fuel by emerging markets like China and India.

For fundamental analysis we think the market is still undecided and may have an adjustment to the declining dollar, ie a rise in the price of Euro. Although we maintain our long-term projection that the dollar should be further strengthened.

Technical Analysis

The price of the Euro is in a congestion phase and its variation has been almost Impresept this week, closing with a negligible difference compared to the previous week. However, it seems that the Euro is gathering energy ...

As we see in our next figure, we see that the Euro price and technical indicator RSI are diverging (see: Forex Courses ). If we follow the technical theory, this divergence should translate into a strong desire for a Euro price rises, and a weakening dollar.



This divergence would be like a signal optimism in this crisis, because a change to an uptrend in the dollar would result in increased confidence in the stock market (less to investors covering Dollars) implying as signs of economic recovery.


In summary, we think it is very possible that there is Euro price recovery in the short term, but we arguing that the price of the Euro should continue to fall in the long term.