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Human beings can be very pessimistic at times. I recently read of a study conducted in the 1990’s in the USA which found that primary school children received an average of 14 negative messages for every positive message they received during the day. Safety in the Market students might like to read some archive articles on Trading Psychology, however as an experiment, you might also want to turn on the nightly news or pick up a newspaper and count how many negative items there are compared to positive items.
There is certainly a very negative sentiment regarding the Euro Currency (EC-Spotv in ProfitSource) at the moment. With the falls we have seen in the Euro this year, we are starting to hear serious talk of the Euro Currency being scrapped altogether.
As a trader, I’m more interested in what the charts have to say, so let’s take a look at the Euro (EC-Spotv in ProfitSource) in Chart 1 below.
Chart 1
click to enlarge
You can’t argue with the chart – the Euro has fallen from 1.50 in November, 2009 to just under 1.20 at time of writing, Wednesday June 9, 2010.
Now let’s take a look at the entire eleven and a half year history of the Euro as a currency in Chart 2 below.
Chart 2
click to enlarge
Interestingly when the Euro first started trading on 4th January, 1999, it opened at 1.1898. After all the drama, the Euro is simply back to where it began eleven and a half years ago.
You can see that when the Euro first started trading, it actually ran down to a low of 0.8245 – yes, it has been a lot lower than current levels! During that time, I don’t recall anyone saying that the US Dollar was going to disappear – it was just another cycle in the market.
A few weeks ago I wrote about the 1.1480 level I am watching on the Euro, which would be a 100% repeat of the last bearish range on the Euro. This is shown in Chart 3 below.
Chart 3
click to enlarge
The Euro struggled for a while to break through support around the 1.2150 level, but as it struggled, it formed a nice descending triangle pattern, as discussed by John Jeffrey in last week’s Trading Tutors Newsletter article and taught in the Trading Key course.
If the Euro can make a low around 1.15, then I expect a rally in the beleaguered currency. The size and duration of the rally will give us a better insight into the relative strength or weakness of this currency and where it might head to next.
For those who are interested in breaking down a currency using Gann analysis, I will be presenting an Online Forecasting Seminar on the Euro on June 19th. In this special webinar I will assist you in setting up various Gann techniques as saved chart pages and will be giving you specific scenarios to watch on this currency for the remainder of 2010.
So despite all the negativity, I don’t think it’s time to say “Goodbye” to the Euro just yet. Whatever happens to this currency, I’m sure there will be many more great trading opportunities to come in the meantime!
Be Prepared!
Mathew Barnes
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