Central Banks Signal End of Low Interest Rates - Technical Analysis on Rising Euro
Calls for Rate Increases Rising to an Audible Level for Bernanke
Rising Oil prices and Food prices worldwide can be attributed to the falling US Dollar, and like it or not - there is no other real "safe haven" in the world. So finally.... the Fed is making noise that it might start raising interest rates and supporting the US Dollar. US consumer confidence is reported to be at it's lowest since 1980! Former Fed Chairman Paul Volcker has been very vocal lately about Bernanke's team ignoring inflation. When Volcker was Chairman he raised interest rates into the high "teens" in the early 1980's. This successfully stopped the bleeding of the US Dollar for the Reagan administration. Volcker is also credited for causing a recession in the process.
Signs of Other Central Banks Frustrations
On Friday, ECB member Erikki Liikanen echoed and restated Trichet's comments about Central Bank policy being focused on the "Long Term" price stability and watching inflation. This is in contrast to the "Short Term" interest rate policy that the US Treasury has been using to maintain liquidity in the financial markets amongst banks. The Financial Times front page reported that the ECB is investigating that banks are exploiting the liquidity of low interest rates to "offload more risky assets"
Euro Rising - For Now
Technical Analysis - Interest-ing Chart (click on chart to enlarge)
The Euro gained about 100 pips in the New York session closing the week at approx 1.5575. The 60 Minute chart above on the EUR-USD is interesting from many angles. Friday's close shows a nice Triangle Pattern that is in play. 1.5700 is a potential target If this Triangle completes, as it coincides with a 1,618 extension. Price settled in at a "Prior Resistance Level" at the May 6 spike just shy of 1.56. Also interesting in this chart is a Fibonacci Cluster with 200 and 161.8 extensions at the 1.5780 range.
Beware that any clear signs of raising US interest rates from the FOMC could see the Dollar gain substantially and quickly - Despite the bullish implications on this chart for the Euro.
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