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Tuesday, 2 December 2014

EURO to fall, breaking out of the Support Zone

Continuing from my last post, this long-term chart shows the history of the Euro, against the US Dollar, to date. Shaded is its normal zone, over its lifetime, between $1.1 and $1.4. 

We get a Resistance Line by joining the tops and a Support Line from joining the Bottoms. Everything in nature forms patterns, and the normal  pattern for share prices is to swing up and down between these two lines, while following an overall upward or downward trend. The present Support Line and Resistance Line are converging, which means that the chart must break through one or other fairly soon, falling back into the constraints of the longer term trend lines.

Normally the chart would, at the present moment in time, bounce off the Support Line once more, following the amber broken line. However, the expectation that the US will abandon Zero Interest Rate Policy (ZIRP) sometime soon, while the Euro Zone will continue this policy, will probably cause the chart to break through the Support Line now following the blue broken or dotted line. The downtrend would then continue until the lower bound of the normal range is reached.

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