The EUR/USD was lower by more than 100 points at the start of the week’s trade today, as fear of a spreading swine flu epidemic gripped global capital markets. Centered in Mexico, the swine flu outbreak has managed to kill more than 80 people, but the latest cases in US and Canada have not resulted in any further fatalities so far. Human to human infection of swine flu is spread through touch and sneezing and is treatable with antibiotics. Investors in Asia, still haunted by memories of SARS outbreak in 2003 were quick to react, selling high beta currencies while seeking refuge in the dollar and the yen.

The EUR/AUD is currently retesting 61.8% support near 1.837 in what could be point C of an emerging butterfly pattern which is projected to complete near previously established resistance near 1.8583.

The euro rally continued in early European trade today after the IFO survey of business confidence handily beat expectations printing at 83.7 vs. consensus calls of 82.1. The IFO release was the third positive economic surprise from the EZ this week, following on the heels of better ZEW and PMI data numbers. As a result the EUR/USD has rallied more than 300 points off the week’s lows as short covering continue unabated.

The IFO survey of business expectations printed much better than expected confirming other data points from the Eurozone this week that showed a possible turn to the upside in the region’s economy. The IFO survey recorded a reading of 83.7 versus consensus expectations of 82.4. More importantly the Current Assessment figures improved to 83.6 from 82.7 the month prior.

A bearish Gartley and double top is forming on the EUR/AUD.

The euro received a lift from better than expected PMI Manufacturing and Services surveys both of which printed materially stronger than forecast. The Manufacturing PMI rose to 36.7 from 34.7 eyed while the Services survey jumped to 43.1 from 42.1 projected. As we noted earlier, “Today’ s upward surprise should take some pressure off the ECB in the near term. European monetary authorities have come under enormous amount of criticism for keeping credit conditions too tight at a time when the rest of the G4 has implemented a near Zero Interest Rate Policy. The uptick in the PMI data suggests that the EZ economy is responding to a pick-up in global demand despite relative lack of fiscal and monetary stimulus.”

EZ PMI Services survey registered it best reading in six months printing at 43.1 versus forecasts of 41.2 while the Manufacturing gauge also improved to 36.7 from 33.9 the month prior. The better than expected results of the survey suggest that the contraction in EZ economy may be bottoming out having reached its nadir in Q1 of 2009.

The ZEW survey of investor expectations improved markedly in April jumping to 11.8 from -6.5 the month prior and helped lift the EUR/USD to session highs of 1.2990 in early European trade. Investors were encouraged by signs that the contraction in the 16 member union was beginning to flatten out and undoubtedly were influenced by the strong recovery in the equity markets in March.

The EUR/USD broke the key psychological barrier of 1.3000 in early Asian trade this morning after comments over the week-end by ECB chief Jean Claude Trichet suggested that the central bank may lower rates by another 25bp to 1.00 percent while ECB Executive Board member Lorenzo Bini Smaghi said the bank’s benchmark 1.25 percent interest rate is “very close” to its floor. The ECB council continues to be divided over the proper monetary policy path given the economic weakness in the region and this disagreement amongst policymakers has created tremendous uncertainty for the currency as traders deciding to sell first and ask questions later.

Massive redemption flows of about $45 Billion in European bonds and dovish comments from ECB President Jean Claude Trichet sent EUR/USD to a monthly low of 1.3064 in Asian trade today as the currency suffered losses for the fourth day in a row.

There is a bearish Gartley pattern forming on the EUR/JPY.

There is a bearish Gartley pattern forming on the EUR/CHF.

A very quiet night of trade in the currency market with both Europe and North America closed for Good Friday holiday. With little event risk on the calendar trading was dominated by stop running in Asia and short covering in Europe as the EUR/USD remains weak relative to the rest of G10 in the wake of comments by Jean Claude Trichet that rates may go lower and quantitative easing may begin.

The EUR/AUD has been under strong selling pressure since mid-March dropping approx 1,400 pips recently testing ~1.85 support.

For the third night in a row risk aversion flows dominated Asian trade as Nikkei continued to correct its recent gains, but as European trading settled into its morning routine currencies stabilized with EUR/USD recapturing the 1.3200 handle while USD/JPY crawled back to the 100 level. A spate of negative news from Ireland which proposed an emergency budget plan pressured the euro throughout Asian trading with the unit falling to a low of 1.3145 as traders feared that Irish fiscal problems may balloon out of control.

There is a bearish Gartley and double top forming on the EUR/JPY.

The EUR/GBP is on the cusp of a medium-term bullish break-out as prices come off bullish Gartley pattern completion at daily trendline support.

The ECB shocked the market by lowering its overnight rate by only 25bp to 1.25% versus consensus calls of a 50bp cut despite the worsening economic conditions in the Eurozone. The EUR/USD immediatey shot ot 1.3400 but traders will await the post announcement press conference with Jean Claude Trichet to draw further conclusions.

A bullish 3 drives patterns has completed on the EUR/CHF. Included is a very important update from the original feature.

A bullish Gartley pattern and double bottom are forming on the EUR/GBP.

A bullish butterfly is forming on the EUR/AUD.

Currencies spent the last working day of the week in generally listless trade until comments by German Finance Minister Peer Steinbrueck roiled the market sending EUR/USD sharply lower in early morning Frankfurt session. Mr. Steinbreuk noted that euro was at risk if the EU's Stability and Growth Pact isn't taken seriously.

A bullish 3 drives pattern is forming on the EUR/CHF.

Both bullish targets have been achieved, but there may still be life left in the recent short-term EUR/CHF rally...

A bullish butterfly pattern has nearly completed on the EUR/CHF.

Choppy waters leave little changed in terms of new pattern development...

German and French PMI readings improved for the first time in months suggesting that that vicious contraction in demand that dogged the region over the past year may be showing nascent signs of stabilization. German Manufacturing PMI printed at 32.2 vs. 31.9 eyed while the Service PMI rose slightly to 41.7 from 41 forecast. The French data was better with services rebounding to 42.9 from 40.2 expected and manufacturing registering a reading of 36.3 versus 35 called. The EZ Composite PMI number also rose to 40.1 from 39.2 the period prior.

Bullish and bearish patterns are forming on the EUR/CHF.

A new trend has emerged in the U.S. dollar this week courtesy of the Federal Reserve’s decision to start buying U.S. Treasuries. However judging from the price action across the financial markets, investors are not entirely convinced that the central bank’s actions will be enough to stabilize the U.S. economy. Stocks and gold prices have retreated after rallying on Wednesday while bond yields recovered. The U.S. dollar has also bounced but remains very weak. Given that the most significant consequences of the Fed’s action are higher bond prices (lower bond yields) and a weaker U.S. dollar, traders should not be distracted by the sell-off in U.S. equities. With no economic data or major announcements from the U.S. on Friday, profit taking has hit the currency market.

On a very quiet night of trade with Japan markets closed for a holiday, EUR/USD held its ground, for most of the early European session pivoting around the 1.3700 level. However news of a weak EZ Industrial Production report triggered a slew of stops and the pair tumbled to 1.3550 within a matter of minutes by midday European trade.

Eurozone Industrial Production contracted further in the month of February losing -3.5% versus expectations of -3.8% drop. On a yearly basis industrial output fell -17.3% vs. forecasts of -15.5% decline. The news was hardly surprising to the market given the continuing complete collapse of global demand.

FOMC's stunning announcement yesterday that it will buy up to $300 Billion in Treasury bonds took the currency market by surprise and rallied the EUR/USD by more than 500 points in less than 24 hours. As we wrote earlier the FOMC announcement ,” represents an 'all-in' bet on massive monetary stimulus in order to stem the worst contraction in the US economy since World War II. The move is of course wildly dilutive to the currency with nearly $1 Trillion created out of thin air. Little wonder then why the dollar collapsed across the board even as other asset classes rallied. It also indicates that the Fed may have come to the conclusion that the two biggest customers for US debt – China and Japan – may be unable or unwilling to provide additional capital to finance the gargantuan expansion of US fiscal spending this year and next.”

The reverberations from yesterday’s surprise announcement by the Fed continued in the currency market with EUR/USD remaining bid in early European trade but the 1.3500 handle remained serious resistance as the pair had trouble penetrating that level. Yesterday’s announcement by the FOMC that it will purchase up to $300 Billion in US Treasury securities, spurred a massive dollar sell off as few traders expected the Fed to initiate quantitative easing quite so soon and on such a large scale.

A bullish Gartley pattern and double bottom is forming on the EUR/CHF.

An update to this morning's GBP/USD and EUR/USD trades....

The EUR/USD regained the 1.3000 handle on early European trade after the ZEW survey of investor sentiment printed better than forecast. The ZEW for the month of March came in at -6.5 versus -12 forecast as investor sentiment improved for the fifth month in a row, The data was somewhat surprising given the dour state of conditions in EZ industrial sector, but clearly investor optimism was driven by hope that the massive fiscal and monetary stimulus put in place by most of the G10 block will soon begin to yield dividends and revive global demand.

There is a bullish 3 drives pattern forming on the EUR/JPY.

The Swiss National Bank's interest rate decision has been released one day early. Apparently this was mistake on behalf of the SNB, who faxed the rate decision before the official announcement.

There is a profit target update for the bearish Gartley we have been watching on the EUR/GBP.

The EUR/GBP has completed a bearish Gartley pattern.

A bullish butterfly is forming on the EUR/CHF.

As we have promised, trading currencies have become more interesting following the interest rate decisions in Europe. The next 24 hours should prove to be just as exciting for forex traders with the February non-farm payrolls report due for release. The US dollar has rallied significantly ahead of the payrolls report, which is traditionally the single most market moving economic data for the EUR/USD. The cohesive rally in the US dollar and the price of gold along with the sell-off in US equities indicate that risk aversion is the main theme of the day. This also provides a clue on how the dollar could trade following Friday’s non-farm payrolls report (February Non-Farm Payrolls Preview).

Euro was lower in early European trade today dropping below the 1.2600 level ahead of the ECB rate announcement with market participants anticipating a 50bp cut in overnight rates to 1.5%. Traders were also eager to listen to Mr. Trichet’s post announcement press conference for any clues to future policy moves. In the past week a variety of ECB officials have hinted that the central bank may change its focus away from interest rate policy and towards quantitative easing.

A bearish Gartley and double top is forming on the EUR/GBP.

EUR/USD broke the psychologically important 1.2500 level in early Asian trade after a much worse than expected Australian GDP report triggered a broad dollar rally and tripped stops taking the pair to 1.2457 before it recovered above the 1.2500 handle in early European trade. USD/JPY also saw a tremendous amount of flow taking out the 99.00 barrier and now appears to be poised to tackle the 100 level within the next few sessions.

The EUR/USD dropped through the 1.2500 barrier in early Asian trade after weaker than expected Australian GDP numbers triggered a dollar rally taking out stops at the key psychological level. The 1.2500 barrier was heavily defended by option sellers over the past few days, but once the level broke EUR/USD quickly tumbled to 1.2457 before yet more option related defensive buying ahead of the 1.2450 strike propped up the pair.

There is a bullish Gartley and double bottom forming on the EUR/CHF.

Both the euro and pound gapped lower in Asia at the start of weekly trade after a disappointing EZ summit failed to come up with any coordinated solution to the growing Eastern European debt problem which threatens many Western European banks. With nearly $400 Billion of consumer and corporate Easter European debt, most of it denominated in euros and Swiss francs, due to be rolled over this year, EZ financial institutions face a specter of massive loans defaults unless some sort of a restructuring deal is reached.

The euro tumbled at the start of trade this week after the Eurozone summit on Sunday failed to produce any coordinated response to the growing financial crisis in Eastern Europe. Instead, EU officials led by German Chancellor Angela Merkel opted for out for “case by case” country solution, refusing to provide any specific details at the present time.

There is a bullish Gartley forming on the EUR/GBP 1hr Chart.

An update to yesterday's technical feature...

There is a short term bullish Gartley and double bottom forming on the EUR/CHF.

Today's roller coaster ride may have topped out as the EUR/JPY once again tests critical resistance near 1.2600...

There is a long term bearish Gartley pattern forming on the EUR/GBP.

Trade of the week potential as EUR/JPY hits major resistance on extraordinary Fibonacci convergence...

There is a bullish Gartley and double bottom forming on the EUR/CHF.

As the week began the dollar was in retreat for a second session in a row after a Wall Street Journal article suggested that US government may take a 40% equity stake in Citigroup moving ever close to nationalization of the bank. Fears over nationalization sparked a vicious short covering rally in EUR/USD on Friday as currency traders believed that such a course of action would increase sovereign risk for the greenback by expanding the liabilities of US taxpayers.

There is a bearish Gartley pattern forming on the EUR/CHF.

The EUR/USD gave up much of yesterday’s gains in Asian and early European trade as risk aversion and woeful PMI flash readings kept the unit under pressure for most of the night. UK data on the other hand registered another upside surprise keeping pound within reach of the 1.4300 figure.

UK Retail Sales posted a gain of 0.7% versus forecast of 0.0% surprising the currency market which was geared for a much weaker result. December's data was also revised upward coming at very healthy 1.6% rate. The news confirms the sharp rise in BRC retail sales earlier in the month and suggests that UK economy may be more resilient than the market current dour consensus.

A bearish butterfly pattern is forming on the EUR/JPY 4hr Chart.

Dollar steadily lost ground during the Asian and early European sessions today as bargain hunting and short covering helped drive both the euro and pound higher. After coming close, but failing to take out the psychologically important 1.2500 level yesterday, EUR/USD catapulted higher on a buy recommendation by US investment bank that cited excessive bearishness in the EZ and the Eastern European economies.

There is a bullish Gartley and double bottom forming on the EUR/JPY that could provide strong support.

A highly symmetrical bullish Gartley pattern is forming on the EUR/JPY.

Traditionally, EUR/GBP is known as the range trading currency. Compared to the other commonly traded currency pairs, it used to have one of the narrowest average daily and monthly ranges. For example, between 2005 and 2007, EUR/GBP traded within a 400 pip range.

There is a short term bullish Gartley pattern forming on the EUR/CHF.

There is a long term opportunity to short the EUR/CHF on the horizon.

A large bullish Gartley has nearly completed on the EUR/GBP.

The EUR/CHF is approaching strong resistance caused by a bearish butterfly pattern.

A follow up to yesterday's technical feature "EUR/JPY: Long, or Short?"

Equally attractive high probability opportunities ahead...

Why to watch out for Gaps and Wide-Ranging Candles within Geometric Pattern Recognition...

The EUR/USD rallied through the 1.3300 level in early European session on the back of better that expected IFO results, but couldn’t hold that level for long as profit taking pushed equities lower and curbed some of the risk appetite that dominated overnight trade. The IFO survey of business climate surprised to the upside printing at 83 versus 81 forecast while the current assessment component also beat expectations coming in at 86.8 versus 85 projected.

The EUR/USD ran to 1.3000 in early European trade today spurred by a major short squeeze in the Asian session as risk appetite returned to the currency market. However the pairs gains were tempered by a very weak French consumer spending report which suggested that growth in the region is likely to contract more severely than initially forecast.

The EURUSD erased almost all of its Asia session gains after a news report that Ireland may call in the IMF if the country’s economy worsens hit the wires at the start of European trade. The currency market which was steadily bidding up the EUR/USD pair in a bout of short covering ahead of Thursday’s ECB interest rate announcement was caught completely wrong footed and the unit plunged 100 points in 20 minutes on fears that such a move would create unprecedented political stress in the region.

Thin market conditions continue to dominate in the currency market on the eve before Christmas. Trading ranges for all of the major currency pairs have been relatively narrow, especially when compared to the large swings that have been characteristic of the third and fourth quarters of 2008. There were both upside and downside surprises in this morning’s economic data but even the upside surprises were numbers that reflected a contraction in US economic activity. This has fueled the mild sell-off in the greenback that began at the European open.

It is the first trading day of what is typically the least liquid period in the financial markets. As a result, there was no consistent trading pattern in the US dollar today. The greenback weakened against the Euro but gained strength against the British pound and Japanese Yen. We still believe that the US dollar has hit a top and could be at the cusp of a major reversal. The EUR/USD’s resilience to the US stock market sell-off indicates that we are finally seeing the weak outlook for the US economy reflected in the weakness of the US dollar. In 2009, the greenback may no longer be the market’s safe haven currency of choice as yields on Treasury bills sit at zero to negative levels.

In a liquidity starved session, the EUR/USD skyrocketed past the 1.4700 barrier in early European trade as momentum players ignored the worst IFO reading since 1982 and sent the unit flying after it tripped stops at the 1.4500 barrier. The breath taking ascent took place against the background of deteriorating economic conditions as the mantra of the currency market continues to be - yield, yield, yield.

With dollar denominated assets yielding next to nothing, we have continued to see money flow out of the US dollar. The greenback fell to the lowest level against the Euro since September and dropped to a new 13 year low against the Japanese Yen. The losses have been even more staggering since the beginning of the month. The dollar has fallen 14 percent against the Euro and 8 percent against the Japanese Yen. This significant sell off begs the question How Much Further Can the Dollar Fall? If you watched the price action in the currency market this past year, you will know that trends dominate. With only 2 weeks until the end of the year, we could be stepping into a longer phase of dollar weakness.

After several straight days of triple digit gains both EUR/USD and GBP/USD stalled in early European session as traders locked in profits ahead of the FOMC decision scheduled for 17:15 GMT later today. In relatively quiet night of trade the euro fell back from the 1.3700 level hitting a low of 1.3628 as data from the EZ showed continued weakness in both service and manufacturing gauges. Cable dropped even harder to 1.5210 after reaching a high of 1.5477 yesterday despite hotter than expected CPI numbers.

EUR/USD got off to a strong start on the first trading day of the week, as optimism among Asian equity investors, whetted risk appetite pushing the pair to within a whisker of 1.3500 level in early European trade. Both Nikkei and Kospi propelled higher rallying more than 5% each on the day, boosted by a variety of factors from the expectations of bailout of US automakers to the more than 7% spike in Baltic Dry Goods index on Friday.