Greece has Spoken, Now What for the Euro

• Posted by Greg Harmon
• on June 22nd, 2011

There has been a lot of media coverage of the situation in Greece. No confidence votes controlling disbursement of ECB funds. Would it pass or would the Euro be put in jeopardy. Well the currency market sure did not seem to care much. Remember the crisis in Greece in May of 2010, it crushed the Euro. Take a look at the weekly chart below for the Currency Shares Euro Trust, ticker $FXE, and the blue oval if you have forgotten. No such crush to the Euro prior to this vote and a muted

initial response trading near 144 against the dollar. But that weekly chart does show a crossroads with the FXE passing through the lower Median Line (LML) of the green bullish Andrew’s Pitchfork and midway between the Upper Median Line (UML) and the Median Line (ML) of the bearish red Pitchfork. Full separation with the green LML would put the red Pitchfork in control and look for the FXE to gravitate towards either the UML or ML. This is the first thing to watch for, a hold or separation from the green Pitchfork. The daily chart on a 16 month timeframe shows that it is hovering around the 20, 50 and 100 day

Simple Moving Averages (SMA) on both sides of a 23.6% retracement of the move higher from June of last year. Tangled in the SMA’s. It is biased to the upside with the Relative Strength Index (RSI ) rising and the Moving Average Convergence Divergence (MACD) indicator about to cross positive, but stuck none the less.

Moving in to the short term view above shows the possibility of a symmetrical triangle forming using the trendline from January as a base and the line from the May 4 high to the June 7 high as resistance. Another touch and failure to break through will confirm it. This cold mean a range for a while longer between 141 and 145. With the macro events impacting currencies (the debt ceiling debate in the US, and the Greek situation still working out) counterbalancing each other it is not clear which way the triangle will break out or if it will just continue to move sideways. What is clear is the impact that the Euro has on the US Dollar, and since the US Dollar is driving the Equity markets it is important to keep watching. Stay tuned.

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