Based largely on dollar weakness and rising oil prices, the Euro is currently worth $1.5018, after reaching a new 52-week high at $1.5051. The same dollar weakness has pushed the Pound back near $1.67, kept oil near or above the $80 per barrel level, and has sent the spot rate of gold soaring past $1,100 to a current rate of $1,115 per ounce.

If you had to find a trading chart that epitomized the concept of a slow and steady, healthy rise, it would be the medium to long term charts for the Euro-USD currency pair. Since its double (short-term) bottom near $1.25 in early March, the Euro has been on a consistent, healthy and very steady rise to its current position above $1.50.

Some analysts might suggest that the reason for such a consistent rise is that market factors have been consistently predictable in favor of a higher Euro-dollar ratio. Over the last several months, it seems every time the Fed restates its intention for low interest rates in the near-term, anti-dollar speculation continues to mount.

The consistent two steps forward, one step back trading of the Euro-dollar is unlike what typically happens when speculators are “guessing” and more jumpy as to what direction to take. As traders watch for major events that might affect the value of a currency, the more aggressive types usually try to act quickly to get in before everyone else.

This action, followed by either substantiation of the news or economic or surprise can often cause drastic price swings, which are often immediately corrected by reverse action (buying or selling).

The Euro jumped swiftly from $1.25 to $1.36 in mid-March, which was quickly followed by a corrective pullback below $1.30 in the next few weeks. However, since that point, trading action has been mostly stable with a consistent pattern of upward trend, followed by brief pullbacks.

As was noted in a previous article, the Euro traded from around $1.17 to its all time high near $1.61 from October 2005 to July 2008, before dropping to $1.25 during the summer swoon of 2008 that sent oil prices from $1.47 to near $30 in a few months. A quick look at the 5-year chart for the Euro-USD seems to show the Euro attempting to retrace its move up from 2005 to 2008. A similarly long upward move could take the Euro to a point near $1.67-1.68.

Certainly, economic conditions in either region (Europe or the US) or a change in US monetary policy could prevent the Euro from nearing or surpassing its high over $1.60. But, given that the long-term trend up has been consistent and steady, it would take something significant to break the mind-numbing pattern of up, up, up.

Neil Kokemuller
9:09 AM EST
Wednesday, November 11, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices.

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.