Long Term EUR/USD View

EUR/USD Monthly

The monthly chart of the EUR/USD displays the long term picture of the pair's adjusted prices, with cycles and classical chart analysis.

Looking at the cyclic picture first, we see an approximately four year basic cycle of major lows, with a bigger cycle of approximately sixteen years to separate the lows of 1985 and 2001. Notice how the 2005 low was intact with the basic four year cycle low, which gives an indication the next major bottom will be during the first months of 2010.

Combining the cyclic picture with classical chart analysis, we can see how the channel almost perfectly defines the uptrend. Notice how the longer term cycle fits perfectly with the channel’s view. If the cycles continue to be as accurate as they have in the past, it’s possible the next touch of the channel will take place in twenty months from now.

According to the observations we present in the monthly chart, we see the move after the 1.6020 high as a phase of correction and consolidation, something which may continue until past the end of summer. This phase of consolidation is more visible on the daily chart, where its short term range is between 1.5300 and 1.5800.

While the correction could extend to 1.5000 or even lower, we see great potential for further dollar weakness later this year and into the beginning of 2009, where the Euro could rise up against the dollar at levels of 1.6700-50. At this intensity, the Euro will test the upper part of the channel which contains the move, where it will form two equal waves - A-B and C-D on the chart. Euro “loves” to form two equal waves in all time horizons and we see the area of 1.6700-50 as a possible target should this scenario play out.

EUR/USD Daily

The daily chart of the EUR/USD displays the medium term picture for the pair. We can see clearly the phase of correction and consolidation we mentioned above and for the next month or two we expect this range to ‘dominate’.

1.5280-00 represents the lower boundaries of the sideways formation and 1.5820-50 the upper. Extended moves could lead to 1.6000 and 1.5150-00 but eventually we should see the Euro break higher after this consolidation phase is over. Below 1.5150 we may see further correction to the 1.4950-00 area, which we see as the limit for any downward moves, and a good buying opportunity in the medium term.

FX Greece

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