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The Euro's Relentless Climb into Uncharted Territory

Currencies / Euro May 27, 2008 - 08:30 AM GMT

By: Black_Swan

Currencies Best Financial Markets Analysis ArticlePinpointing support and resistance levels in price charts usually isn’t too difficult. It simply involves finding previous points where prices bottomed out or topped out. But the task becomes a bit more difficult when there are no historical prices to target.


Take the current skyrocketing price of crude oil. Almost anyone who follows the markets or drives to work has an idea that crude oil (and all energy prices for that matter) are at levels never seen before. So if you were to use price data alone to find a point where crude oil might top out, it’d be impossible to find a previous high mark to use as a target.

Focusing on the currency markets, as we do, there have been many instances over the last year of the U.S. dollar bear market where currencies paired against the buck have soared to record levels. The euro, having become a virtual dollar alternative, is the obvious example.

The euro has easily surpassed its all-time highs against the greenback since the multi-nation currency’s inception. While the euro has only been around since the early 1990s many analysts turned to the historical prices of the Deutschemark as a euro proxy. But even still, the dollar has sunk to a level against the premier European currency that has never been seen before.

Throughout the euro’s climb, as it navigates through uncharted territory, key psychological levels have become points of resistance. Only these points haven’t slowed the euro all that much. A chart shows a clearer picture:

We could go back through pages and pages of articles to read about expectations for the euro in each step of its bull market. But it’s a lot easier just looking at this chart. Considering the euro’s unprecedented climb, analysts highlighted critical barriers at $1.30, $1.40 and $1.50. And now $1.60 is the mark to beat.

You can see how each psychological barrier created some uncertainty. At those points the euro merely tracked sideways – a clear departure from its “up, up and away” price trend. But now, having faded after briefly touched the psychological $1.60 mark, it looks as though it’s building back up some steam.

Should we get a decisive break of this level in the next few weeks, we could be hearing $1.70 in no time ... and a lot sooner than many thought possible.

Jack Crooks

Black Swan Capital LLC

http://www.blackswantrading.com/

Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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