After a roughly two week stint flirting mostly above the $1.40 level, the Euro has fallen back to a current rate at $1.3834 (June 16). The Euro has steadily dropped from a peak over $1.43 on June 2nd. It has operated on a downward progression from the $1.40 level for the last three days.

The Euro broke below an important medium-term support level near $1.3891 yesterday. A look at a 3-month trend chart suggests that without a quick return above this level, the Euro could be headed toward another support level test around the $1.3475 level. This mark was last touched on May 15th, prior to a roughly nine pip jump in about one month’s time.

The Euro has been on a strong upward trend throughout 2009. After bouncing off another bottom near $1.25, the Euro gradually worked to the $1.43 point. This surge was largely based on dollar weakness, as opposed to strength in the Euro. Overall negative dollar sentiment, due to the weak US economy and a zero per cent interest yield, have pushed commodities prices higher, and led currency speculators to give up their greenbacks for even lightly more appealing opportunities.

Many European marketplaces are still struggling as much as the US economy. However, the American turmoil has dominated much of the global market center stage. Mixed data Tuesday, including more positive data on the housing front, helped buoy the rejection of the over-$1.40 level for the Euro.

New home construction reached a 3-month high according to the latest data. Housing and credit still carry the torch for hopes of a US economic recovery. Housing data has been progressively better over the last several weeks, helping spur talk of a pending recovery. Many stock market analysts have come out of the woodwork in the last few days to aggressively say that the US financial sector and stocks are still in bear market mode.

While anyone who has ever speculated on currency movement would say there are never any guarantees of direction, it is hard to imagine the Euro climbing higher at this point in time. While overall sentiment on the dollar remains weak, there is simply no major catalyst in play to drive the Euro beyond its current level. The current ratio is settled neatly in the middle of its all time high market above $1.61, set last year, and this year’s low mark near $1.25. European economies just don’t seem strong enough to move in on all time highs.

A major downward break is as unlikely because of the lack of energy behind the greenback. However, another test of $1.25 could be in the cards. A significant break below could bring forecasts of a sub-$1 Euro into play sometime later this year.

Neil Kokemuller
10:52 PM EST
Tuesday, June 16, 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.