Week on July 6-11, 2008

EURUSD moved higher last week as was the forecast but failed to sustain prices above 1.5900 and made a dramatic move lower on Thursday after the much less hawkish statements from ECB President Trichet following Thursday’s ECB rate hike. The move lower last Thursday was limited to 1.5676 which is the 38.2 of the 1.5903 -1.5907 rise, as this level should hold initially but a move to the 50% level at 1.5604 is very possible considering the momentum of the move down from 1.5907. So, look for 1.5676 to hold as a break here targets 1.5604 (50% of 1.5302-1.5907) which must hold in order to maintain the medium term bullish trend from the June 13^th 1.5302 low, as a sustained break here will turn the medium term outlook more bearish favoring a move to the 61.8 of the 1.5302-1.5907 rise at 1.5533, followed by 1.5431. As to the broad outlook, the rise from the November 2005 low at 1.1642 remains active as only a weekly close below 1.4346 will confirm the rise from 1.1642 is complete at 1.6017, with further downside risk towards 1.3830 to follow. To the upside, 1.5844 remains pivotal as a daily close above this level favors an extension towards 1.6 and beyond.