For a change I thought I would take a look at the EUR index as I always focus on the USD Index. The EUR index is interesting as it is has been trading in a symmetrical triangle. There was a bullish false break lower which occured in mid April, however strength has since failed by old trend-line resistance and has fallen back below the old support. If this break is maintained and given that the EUR is the biggest component of the USD Index this perhaps gives extra weight to the possibility of USD strength in the pipeline. A decisive break under 114.983 will signal medium term weakness in the EUR. As always, click on the chart above for more details.
Most of us are aware of the failure of many European banks to give any insight at all into the state of their balance sheets. Industrial production continues to be poor in Germany and most ECB bankers seem to be on a different planet from the rest of us. If there is no demand from elsewhere it does not matter if you have a low level of consumer debt (ie Germany), as somebody still needs to buy your products. Also, given the stubbornly low levels of inflation in the eurozone, it seems to be setting itself up nicely for a Japanese style lost decade. If you're suffering from deflation what you need is a weak curency not a strong one, therefore I am biased down for this index.
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