European Market Dominance

Written by Research | 01 June 2010

The overwhelming and dominant factor of the Euro Zone has moved the financial markets for quite sometime now. The economic correlation between the major trading partners and the contagion effect will not easily be set aside even with the economic reports generated in the United States.

However, with the Memorial Day holiday will somehow shorten the immediate reaction of the prices with the ISM figures and the Non-Farm payrolls due the end of this week's trading. Although, the irony of the matter is the end of the months prices for the currencies may well be a correction from their low levels and the opening prices will also be well bid since the beginning of the month's trading is within the week's opening levels. confusing some traders and the continued reluctance of investors to hold and build positions on extensions of prices for the Euro against the USD in particular.

In certain trading cases such as this, what would be the most advisable criteria to focus on should be the USD Index that may provide some direction for the major currency. Although, the Chinese Reminbi or Yuan should be considered to be included in the basket as a dominant trading partner for the US which also carry a high degree of US Treasuries that finances the majority of the trade deficit with the US. This issue has not been brought up but should really be included in the market analysis of trading the foreign exchange market as a whole.

From our most recent YouTube forex video presentation of the USDX remaining strong, we have indicated the possibility that whenever the NFP provide a positive figure for the week's report this may well be the added fuel to accelerate the USDX to its initial target of 88.80. Others may disagree as to where this figure came about. Although, the historical parameters then will show that a certain equilibrium price relative to the rest of the currency figures shows that the US dollar index at this price levels would have indicated the extension of prices for the Euro and the Pound to be in line with their historical figures given a relative 90% accuracy which we have used since we have found and used these figures ever since we have been trading the market. As to when such figures for the USDX to reach this number of 88.80 may also depend on the volumes and open interest which subsequently the June contract month may also be within striking distance of the price before the end of the contract month for June 2010.

On a technical perpective of the USDX; with a lower opening for the month of June from its May closing price would deep not lower than the 85.20 levels which may trigger some short orders where it becomes a buyer's trap for the next leg up. this basis would be from the continuing leg from the elliot wave formation where wave 5 high would touch its extension nearing the 88.80 levels.But no trend reversal is expected only slight corrective moves lower just to adjust its relative strength as of the weekly momentume is only at he 51% which would still give ample room to move higher as volumes build and open interest prevails in the market. Please refer to the June contract month ( DXMO) 's VOI as it gradually increases from the previous weeks average volume levels and our market view report on the

USDX remains strong video : http://www.youtube.com/watch?v=EDbjkOBNOGw

In essence, we will focus on the USD Index for now and using our relative one price page indicator to show the price relationship and market behavior of the prices as each pair moves with and against each other until the end of this month for June. Most chart indicators still shows no signs of market reversal patterns as the directional trend lower for the European currenies are still intact. Corrective moves are expected in both directions and renewed volatility would continue from the economic news and reports from the US Non farm Payrolls and Jobs numbers.