Week of August 10, 2008

EURUSD witnessed broad weakness in recent days as my forecast for a weaker Euro last week was spot on. A few weeks ago I had suggested a daily close below 1.5847 would see prices move lower with 1.5583 as the objective. The 1.5583 level was a very critical level of the short term rise as this represents the 61.8% of 1.5302-1.6037 move. Similarly, EURUSD is now approaching another key level at 1.4969 which is the 61.8% of the medium term rise 1.4309-1.6037, as this level also represents the 2007 high at 1.4969 which was achieved Friday, November 23, 2007, the day after US Thanksgiving Holiday. So, this is sort of the medium term “line in the sand” as prices sustaining below this level target 1.4679 followed by 1.4358, as the later represents the 38.2% of the broad trend rise from 1.1642-1.6037. In that the 61.8 of the short term rise was breached quit easily as subsequently prices collapsed to within a few pips of the 61.8 of the 1.4309-1.6037 rise at 1.4969, the outlook remains the same as the EURUSD should continue to move lower with the fore mentioned 1.4358 as the next objective. However, should 1.4969 prove to hold in the nearterm, then at this juncture, any short term or medium term rise in the EURUSD will only provide selling opportunities with upside potential for a retest of the 200 day MA coming in at 1.5224. Often, when prices break key levels such as daily 100 or 200 MA’s, prices will gravitate back towards these levels to retest them before resumption of the prevailing trend. However, the trend remains down as 1.4358 is the next objective. I will have a detailed outlook for the week ahead during Monday’s London session.