Best Financial Markets Analysis Article On August 4, 2009 Rectangular pattern breakout happened in the EUR vs. USD at 1.43 levels and this is the critical breakout for US dollar which will lead to long term depreciation against Euro. Last week US GDP was published, the data shows that the GDP contracted by 1% for Q2 2009; indicating the recession is over and Q3 will be stabilization coupled with marginal recovery of US economy.

Please refer our previous article on EUR vs. USD forecast: http://www.marketoracle.co.uk/Article12385.html

Based upon this upside breakout, US dollar will depreciate gradually to 1.64 against Euro for the long term. It has resistance at 1.48 and 1.58 levels; it is likely to breach the resistance levels as it is not strong enough.

This below chart shows the breakout in EUR vs. USD:

As global economic recovery, the attractiveness of the US dollar is diminishing and the investors are seeking the alternative investment like equities and commodities which would yield higher returns than the US dollar. This will result in diversification of the investment from US dollar to equity and commodity market.

According to our forecast, US GDP will grow 1.2 percent in Q3 2009 despite of increase in unemployment at slower rate. During the third quarter of 2009, consumer spending and industrial production will remain weak but at slower rate and increasing in saving rate will continue to reach 8-9% of the personal income.

Purchasing managers index, Consumer confidence index, Stock market, housing market and durable goods new orders indicates that the recovery in the US economy is not too far and likely to take place during Q3 of 2009.

The above chart indicates the strong upside breakout in the EUR vs. USD which is support by the Moving Average Convergence/Divergence (MACD) crossover and the support from the 50 day moving average.

As the depreciation of US dollar is anticipated, the cash inflow (i.e receipts, receivables, etc) of companies should be in terms of Euro and cash outflow (i.e payments, payables etc) must be in term of US dollar in order to safe guard their profit margin and also to maintain earnings.

By EliteGlobal Market Research

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Comments

reginald
05 Aug 09, 08:29

u.s. dollar

this is purely speculation.

an independent journalist's story:

the arrest of an australian rio tinto executive a maneuver by china to open dialogue about the coming change in global currency.

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