Bloomberg is reporting Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate.



The euro fell the most in almost eight years, pushing the currency to a six-month low against the U.S. dollar, as traders pared bets the European Central Bank will raise interest rates as the economy slows.



The euro dropped below $1.50 for the first time since February after ECB President Jean-Claude Trichet yesterday said economic growth will be "particularly weak'' through the third quarter.



"We are now seeing a lot more negative surprises coming out of Europe than from the U.S., more so than any time during this credit shock," said Jim McCormick, head of currency strategy at Lehman Brothers Holdings Inc. in London. "At the same time, you've got some pretty strong capital inflows to the U.S. We kind of have the perfect circle of fundamentals bumping into strong technicals."



European retail sales dropped by the most in at least 13 years in June, the European Union said on Aug. 5. Consumer confidence slid in July by the most since the Sept. 11, 2001, terrorist attacks, the European Commission said July 30.



"This is the beginning of a new chapter for the dollar as Trichet and other central banks are paying more attention to the downside risk to growth," said Dustin Reid, a senior currency strategist at ABN Amro Bank NV in Chicago. "The decline of oil prices is a significant driver behind this dollar rally because it enables other central banks to turn their eyes away from inflation and focus on growth."

$USD - US$ Index Daily

$USD - US$ Index Daily





On the daily chart the US$ crossed resistance and sitting right on the 200 day exponential moving average. It has not closed above the 200 EMA since March of 2006.

$USD - US$ Index Monthly



$XEU - US$ vs. Euro Weekly



$XEU - US$ vs. Euro Weekly

On the weekly chart there is a clear double top. This is now a third test of the 152-153 area. I did not think the last test would hold but it did, moving on to a double top. With the Fed on hold and Trichet's likely next move a cut, there is plenty of room for the dollar to rally vs. the Euro.



$XBP - US$ vs. British Pound Weekly

$XBP - US$ vs. British Pound Weekly

The British Pound broke the weekly uptrend line and has been floundering in a sideways channel for about 8 months. However, the bounces appear to be weakening and it's do or die for the pound right now. I doubt support holds this time.

$XBP - US$ vs. British Pound Monthly