Renko charts are often useful in identifying the longer term trend because they remove short term volatility in a stock chart. The Euro has been a particularly volatile currency over the last few years due to the financial problems of the PIIGS countries. Below is a weekly renko chart of the Euro:
The chart shows that the long term trend in the Euro switched from an uptrend to a downtrend in 2008. The downtrend since 2008 has been much more volatile than the previous uptrend, as the Euro has staged two large counter trend rallies within the downtrend. Currently the Euro has just hit a resistance level around 140, and has potentially turned down for another downleg. If the Euro goes on to break support at 125 and the previous lower low of 120 the longer term downtrend would be intact. To break the longer term downtrend the Euro first needs to move above resistance at 140.
With the debt troubles in Ireland making headlines over the past few weeks it’s instructive to look at the indexes of the PIIGS countries. First up is a chart of the Dow Jones Portugal Stock Index. Portugal has traced a symmetric triangle on the chart and is still trading slightly above its 30-week moving average.
Italy has also formed a symmetric triangle, but is trading at the lower end of the triangle and has broken below the 30-week moving average.
Ireland has been trading in a tight range since July but within the trading range the index has made new lows for 2010, and a breakdown would make another lower low.
Greece has been the weakest of the PIIGS for the last few years, as it gave up all its gains from a rally in 2009. Greece also made new lows for 2010 this past week and for the bear market from 2008.
Spain has also formed a symmetrical triangle and like Italy is right at the lower end of the triangle.
Overall the technical action of the PIIGS is taking a bearish tone as 4 of the 5 are now trading below a long term moving average, and two of them are potentially setup to break a symmetrical triangle to the downside.