My EURUSD Call

This past week, we've seen some correction taking place for the EURUSD.

The pair surged 197 pts or 1.51% after a thorough whacking the previous week.

The pair had been driven higher by better than expected German ZEW and IFO results which point to a stabilizing economy in the EZ. That saying, we should take this with a pinch of salt as these indicators are measured from a very low base well within the contractionary territory.

I don't see good fundamental reasons for the EURUSD to climb much higher given uncertainties still surrounding the EZ economy and european banking sector.

IMF this week deduced that european banks are facing up to USD 750 bn in writedowns and although these are disputed by economic figures like Trichet and Lagarde, a portion of that estimated amount still create a lot of worry. Plus, jobless rates are growing at a quick pace. Spain just hit 4m.

One major ECB event the market is looking forward to is the 7 May ECB meeting in which ECB members have previously indicated the council will announce 'unconventional methods' to ease credit conditions. Potential wildcard.

If they decide to move to purchase european debt assets in a big way, then it will further hurt the euro. But chances are that they will merely expand their current credit easing programs, given the conservative nature of the ECB on fiscal measures. Nothing much changes.

I'd look for opportunities to sell the EURUSD these coming 2 weeks.

On the daily chart, we see there's a downward channel in which the EURUSD currently trades. in. I'll be looking to sell at the top of the channel, naturally.



However, at what level to sell at is a dilemna for me. I drew two channels on the daily chart and the weekly chart. The tighter channel which is very close to the current price. is from the daily chart. The other channel is wider and more generous spans is drawn in the weekly chart.

Still, being one who always strive for a better risk-reward position, I'd target my order at an appropriate higher price.

Judging from the weekly chart, last week's closing was a bullish engulfing pattern, which may mean further upside.


My call for EURUSD for the next 2 weeks is:

Sell from 1.3400 - 1.3450 (top end of downward channel)

Stop loss: 1.3550

Take profit: 1.3000