WHY THE USD IS VULNERABLE TO NEAR TERM PULLBACK

 

USD vulnerable to pullback from:

EURUSD technically way oversold in short term

That oversold condition means any EU positive news could send USD lower

G-7 emergency meeting may provide that excuse

Also, bad jobs report raised QE 3 hopes, QE 3 is USD dilutive.

 

NB:  If EU leaders fail to act, and/or Thursday Spain bond auction is poor, EURUSD could sell off further.

 

Regarding the Technical oversold indicators: These  mean little in times of strong trends when by definition perceptions of value are changing. Oversold indicators are based on prior average prices for a given period, and an underlying assumption that all prices are equally possible. That assumption does not hold in strongly trending markets, because perceptions of value are changing (in this case for the EURUSD as risks of contagion rise) so all prices ARE NOT equally probably) so technical ‘oversold’ indicators of limited value.

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