Question from Douglas: Why is there still an overall uptrend for the EURUSD?

Posted by Mario Sant Singh 20 December 2012 0 Comment

I received an email from Douglas who wrote:

Hi Mario! I attended your seminar once and remember you saying: When there is a fear and panic, the EUR will go down and the USD will rise. When there is hope and greed, it will go the other way. Why is there still an overall uptrend for the EURUSD?

When you say there is an overall uptrend for the EURUSD, I believe you are referring only to the second half of this year.

Looking at the Weekly chart of the EURUSD, price did rally up from beginning of August 2012 until around mid-September 2012. But since then, it consolidated between 1.2600 and 1.3100. The brief rally was likely fuelled by increased optimism on the Trioka’s efforts dealing with the Euro Zone debt crisis, and market reluctance on investing into the USD while waiting for the U.S. Election outcome.

Click the image to enlarge

The price consolidated since September 2012 as optimism surrounding the Euro Zone started waning. The market now waits for resolutions toward the impending “fiscal cliff” in the U.S.

Looking at the Weekly chart, the overall trend for the EURUSD is still down. The pair was on the downtrend since the beginning of May 2011. Quite frankly, the problems surrounding Euro Zone are far from being resolved and have actually worsened. The USD is not doing well either, since the Federal Reserve just announced they will continue with a USD85 billion purchase of Treasuries and Mortgage Back Securities (MBS) indefinitely. I believe this will weaken the USD in the long term. In the interim period until the year ends, I expect the EURUSD to stay within its current range.

To your success as a profitable trader,