Article by ForexTime

Euro Oversold

The Euro continues to make new lows and as the exchange rate approaches 1.31, a fresh 52-week low might fall.  Prices continue to feel the broader push of divergent monetary policies between the U.S., which is reducing its bond purchases, and the ECB, which seems destine to in act a full scale QE if the LTRO program scheduled for September does not kick start the economy.

The weekly chart of the Euro shows that negative momentum continues to accelerate.  The MACD (moving average convergence divergence) index is printing in negative territory, with a downward sloping trajectory.  The MACD generated a sell signal back in May and continues to point to a lower exchange rate.

The daily MACD of the Euro also shows an indicator that is pointing to lower future prices after generating a sell signal in late August.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.  The index moved from positive to negative territory confirming the sell signal.

The Euro has been oversold for 10-consecutive trading sessions.  The RSI (relative strength index) has been printing below the oversold trigger level of 30, which could mean that a correction could happen at any time.  Traders could look for a scenario where traders buy the rumor (of a full scale QE) and sell the fact after the ECB meeting scheduled for this week.  The RSI is currently printing a reading of 28 on the weekly chart and a very soft 25 on the daily chart.

The RSI is not the only technical indicator reading an oversold condition.  The Commodity Channel Index is printing a reading of -173 on a weekly basis.  Readings below -100 reflect an oversold condition.  The daily CCI is printing a reading that is slightly less oversold near -129.

Article by ForexTime

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