EUR/USD view for week SEP/24/2007

I am sorry, but today I had power installation problem at home. Half of power plugs and lamps not working. That's why the analysis will be shorter, and will not include nice pictures of helicopters and B-52's :-)

I. Important news from the week:

1. FED cut the base rate with 0.50%.

2. FED also cut discount rate with 0.50%

3. EUR/USD hit new record 1.41.25

4. Gold still @ 730+ USD. This was higher weekly close for 20-30+ years.

FED blew it!!!
They totally destroyed the dollar in long term. I think they will inflate now, and stock market will go higher and higher, but only in nominal terms.
GOT GOLD?!?!

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II. The wedge in USD index and EUR index:

USD index weekly chart:
Wedge is completed and broken from "wrong" side. There is mixed signals. RSI have bullish divergence, MACD - confirms bearish developments. However I expect a correction anyway, and rally to upper boundary.

EUR index weekly chart:
Similar to USD index. It raised to the top and broke the wedge on the "wrong" way. Mixed signals - both bearish and bullish.

EUR index / USD index ratio weekly chart:
Not shown, but is exactly as USD index and EUR index.

Before, I wrote following, and once again I copy/paste it:

As you can see, back in 1992, USD was down once 78.43, well, we had similar reading, I can not say how the recent low was, but was close to 78.43.

Before, I wrote following, and once again I copy/paste it:

For first-time readers, and those who do not know, the wedges are reversal patterns. This wedge is bullish for USD index, no matter what people say for US economy, debt bubble etc. I am sure that at the end of the year, the USD will be lower, but wedge suggest we will have one bounce before that.

This is still valid, even the reality shows something else :) .

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III. Wedge in EUR/USD:

EUR/USD 4 days chart:
Broke the upper boundary.

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IV. Summary:

EUR continue to rise, USD to fall, but reversal must occur. Here are why:

1. The wedges are usualy broken the other side.

2. We are on important support of USD index.

3. Elliot wave count on EUR/USD shows a decline must due.

4. The rally in EUR can not go without correction.

5. On a monthly chart of USD index (not shown) there are a trend line that go to 81.20. This is similar reading that the upper boundary of our wedge. I will publish this chart next week.

6. There are some short term wedge on USD index and also on EUR/USD, which is in favour of USD raise.

7. US economy may be in trouble, but EUR-o zone economy is not something else. We will see bad data for EUR-o zone too, as it happened for UK with their recent bank-run in Northern Rock and expectations for trouble in Barkley bank.

Happy week and trade!!!

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V. Carry trade with AUD/JPY:

Will not be updated this time, probably tomorrow.