Monday, 28 Jun 2010

EUR/USD Technicals Point to Continuation of Downtrend

The euro declined further during the New York trading session while the Swiss franc continues to strengthen against both the dollar and the euro.

Declines in the euro are coming from concerns over liquidity shortages. European banks will be required to pay back 442B euros to the European Central Bank on Thursday and many traders worry that this will cause liquidity in the FX markets to dry up.

As such, the EUR/USD has continued its decline that began in the morning hours of the European session. The EUR/USD is currently trading lower at 1.2290, after opening the day at 1.2368. The USD/CHF is also lower at 1.0865 from 1.1103. The EUR/CHF has fallen to an all time low at 1.3327.

The Swiss franc continues its bullish trend that began in December of 2008 and has accelerated upon the announcement by the Swiss National Bank that it would temporarily halt its program of intervention in the FX markets.

The EUR/USD is showing a technical signal that the bullish correction may have exhausted itself. The weekly chart below shows last week's trading formed a doji reversal. Behind the candlestick, we can assume that the bulls have lost control of the market and the bearish trend could continue in the near term.