Citigroup (NYSE:C) technical analyst Aron Gera says the U.S. dollar will probably fall against the euro and British pound, based on emerging technical patterns.
That’s an interesting insight in that the euro and pound have been, and will continue to be under enormous downward pressure, even in light of the specific commitment by the European Union and IMF to have back up loans in place in case Greece defaults, which has given some optimism about the euro.
With that in mind, Gera said, “We’ve seen some buying of the euro recently. The 55-day moving average as a technical indication has historically been pretty decent on euro-dollar. It’s a psychological barrier where you often find a lot of orders concentrated.”
For the GBP/USD, in the short term is seems more predictable because of the consistent, albeit poor performance of the British economy, which long term will continue, but in the short term, as it affects the GBP/USD, there is a more bullish feeling, more based on the lack of shorts in the market than anything else.
For the EUR/USD, that should continue to be very unpredictable, as it seems news from the region changes almost on a daily basis as to what will happen in Greece, even with the guarantees asserted by the EU and IMF.
With the ongoing rumblings in Germany, it’s unclear if there will truly be a bailout for Greece if the time really comes when they will be forced to take it. That’s why there have been so many uncertainties in the market and the currency, as behind the scenes there have been many battles going on about how to deal with Greece and how deeply to support them.
For the U.S. dollar, the recent strength hasn’t come from it being considered a strong alternative, just that there really is no other alternative except for the yen or gold.
All paper currencies are considered suspect by investors now, as central banks and governments around the world have cranked up the money printing presses in attempts to keep their economies running at the expense of the continuing value of their currencies.
It seems now, at least for a short time, the dollar will probably drop against the pound and euro, according to Citigroup, and from there the pound should resume its downward spiral, while the euro may be all over the map as to its value.
