What Could Hamper the Rise of the EUR/USD?

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Please excuse my "editing tool," my "numbering" did not translate from my original document.

Blake Morrow

What could hamper the rise of the EUR/USD from here?

The EUR/USD has had a very impressive rally in the last several weeks off the June lows below 1.1900, but there several factors that may prevent the pair from moving too much higher from here. Below are the top 5 reasons you may want to consider before getting too bullish the EUR/USD at current levels:

1. The equity markets are stuck in a range, and many investors and analysts still believe that there is more downside in the months ahead (myself included). In the foreseeable future, a move lower in equities would more than likely translate to a move back into US Dollars as the "safe haven" currency of choice. Sometime in the distant future, there may be another alternative to holding massive amounts of US Dollars during a crisis, but with the recent "European debt crisis" it did reinforce that the US Dollar is still the undisputed champ.

1. Crude Oil continues to hold below $80BBL. Crude oil prices are a good barometer (at current levels) to understanding risk on/risk off in this environment. I believe that level is at 80, or close to it. In other words, if we stay below 80, this could be interpreted that traders and investors are hesitant about the "global recovery" story. Unfortunately, the longer we stay below this key level, the higher the probabilities we are heading back to 70 or perhaps 65 and in turn would turn equities lower, therefore putting upside pressure on the USD, and the EUR/USD could fall.

1. European bank stress tests may have lead to more questions than answers. Most major financial news publications pointed out over the weekend that the tests were "not stressful" enough and now that it has passed, sellers may re-emerge at any time.

1. The USD continuous index has now retraced 50% of its move from last November and is coming into a major congestion area that will more than likely produce some profit taking from US Dollar shorts. The level of interest is at 81.50.

1. Technically, the EUR/USD today has pushed the 38.2% retracement of its fall from last November and also is retesting a broken trend line that has been in existence for the last decade. Often times, when trend lines are broken, they are re-tested to test the validity of current trend, and this case is lower.

Blake Morrow

www.livemarketalerts.com

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