Week of August 10-15, 2008

EURUSD opened and closed lower for the fourth consecutive week last week as this was our forecast, while today prices have briefly probed below the 61.8% of the 1.4309-1.6037 rise at 1.4969, reaching 1.4905 in early Asian trade on Monday. The 1.4969 level is sort of the “line in the sand”, as this not only represents the 61.8% of the December 12, 2007 low at 1.4309 and the July 15, 2008 all time high at 1.6037, but 1.4969 is also the 2007 high which occurred on Friday, November 23, 2007, the day following the US Thanksgiving Holiday. Furthermore, last week saw the EURUSD close below the 200 day MA, as this last occurred on March 23, 2006. Prior to this date, the EURUSD closed below the 200 day on January 27, 2006 and essentially spent 2 months below this level before eventually breaking back above which last occurred on March 30, 2006 and has stayed above the 200 day MA until last week. In that the 100 and 200 day MA’s are key trend indicators, often, when initially breached, market prices will tend to gravitate back towards these key levels. At this writing, the 200 day MA comes in at 1.5226 and we favor a test of the 200 day MA in the days ahead, while this will only be a corrective move as the medium term trend from the 1.6037 high remains active, as only a daily open and close above 1.5337 ( .382 of 1.6037-1.4905) will complete this fall at 1.4905 and favor further consolidation within a 1.5337-1.5605 zone. So, for the week ahead, look for prices to move back towards the 200 day MA currently at 1.5226 with an hourly close above 1.5133 suggesting prices are attempting to test the 200 day MA. To the downside, a daily close below 1.4969 will suggest prices are once again moving lower with the 38.2 of the 1.1642-1.6037 rise at 1.4358 as the objective.