What I Am Watching (Part 2): EURUSD

By: Guy Lerner | Thu, Apr 15, 2010
Print Email

The EURUSD cross rate has been bouncing around its weekly key pivot point for several weeks now. See figure 1, a weekly chart of the EURUSD.

Figure 1. EURUSD/ weekly

Key pivot points are identified with the large black dots over the price bars. These are areas of support and resistance. The most recent pivot comes in at 1.35447; a weekly close over this level suggests that Euro will gain strength against the Dollar or the Dollar weakens against the Euro. This has yet to happen although the Euro has been probing higher.

Why is this chart important? Weakness in the Dollar continues to imply higher prices for risk assets, such as equities and commodities. The Dollar remains negatively correlated to equities. I believe it is that simple. Recent Dollar weakness has been highly correlated with equity strength. See figure 2 a daily chart comparing the Power Shares DB US Dollar Bull (symbol:UUP) (blue line) to the S&P Depository Receipts (symbol: SPY) (black line). The red vertical lines identify peaks and troughs in the UUP and these coincide nicely (and inversely) with swings in the SPY.

Figure 2. UUP v. SPY/ daily
UUP versus SPY daily



Guy Lerner

Author: Guy Lerner

Guy M. Lerner

Disclaimer: Guy M. Lerner is the editor and founder of The Technical Take blog. His commentary on the financial markets is based upon information thought to be reliable and is not meant as investment advice. Under no circumstances does the information in his columns represent a recommendation to buy or sell stocks. Lerner may on occasion hold positions in the securities mentioned in his columns and on the Web site; in all instances, all positions are fully disclosed at http://thetechnicaltakedotcom.blogspot.com/. However, their positions may change at anytime. For more information on any of the above, please review The Technical Take's full Terms of Use and Privacy Policy (link below). While Lerner cannot provide investment advice or recommendations, he invites you to send your comments to: guy@thetechnicaltake.com.

Copyright Notice: Except for making one printed copy of this newsletter or any other materials, files or documents available from, accessible through or published by TheTechnicalTake, LLC for your personal use (or downloading for the same limited purpose), none of these said materials, files and/or documents may be reproduced, republished, rebroadcast or otherwise re-distributed without the prior expressed written permission of Guy M. Lerner.

Copyright © 2004-2012 Guy Lerner

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com