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The Euro currency and the Dollar both have possible patterns in place that suggest potentially large moves. Below is the current chart of the Euro currency. You can see the continued development of the potential head-and-shoulders topping pattern as the market consolidates beneath the neck-line that I presented back on March 7, in an article entitled Euro Currency Sporting a Potential Head-and-Shoulders Top. This pattern is still in play, and will be unless the market rallies up through the neck-line with momentum. If the pattern were to complete itself, the Euro/USD would trade down to the 112.00 area minimally.

 

 

The U.S. Dollar Index chart, on the other hand, is currently potentially forming the right shoulder of an inverted head-and-shoulders pattern that would project the index up to the 89.00 area minimally. This pattern formation can be seen on the chart below. Please remember that this pattern on the U.S. Dollar Index chart is not yet confirmed. The index must rally through the neck-line (e.g. 82.00 area) for the inverted head-and-shoulders pattern to be confirmed. Additionally, even if confirmed, no pattern is guaranteed and any pattern or potential technical chart pattern can fail.

 

 

What are interesting are the sizable moves and their implications. Since the Euro has generally come under duress during recent periods of increased risk perceptions, a move 14% lower in the Euro/USD would most likely be seen during a difficult time for the global economy and markets if correlations of the past several years remain. Likewise, an 11% move higher in the Dollar Index would probably accompany global economic angst. On the other hand, the currencies have been interestingly docile during the last several days' stock market gyrations.

Dominic Cimino

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Preferred planning concepts, LLC & Cambridge are not affiliated.

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© 2012, Dominic Cimino of Preferred Planning Concepts, LLC (You can explore the services offered by Preferred Planning Concepts by viewing us on our website at www.ppcplanning.com) Any redistribution, reprinting, or reference to this chart or content is allowed so long as reference to the author and source is acknowledged.

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