In the last day or so, the Euro has finally shown some resilience as it has been able to rally and regain some lost ground moving back towards 1.29. Over the last week it has fallen considerably from above 1.30 down to six week lows near 1.28. Back at the beginning of April the Euro received solid support around 1.28 and this level is being called upon right now to provide additional support. It has ever so slightly traded below 1.2800 and these levels represent the lowest levels it has traded to since early April. It has also become evident over the last few days, especially on the 4 hourly chart below, that the 1.30 and 1.29 levels are now providing some resistance and placing pressure on price. During the last half day the Euro has rallied back to 1.29 and has met reasonable resistance there. The Euro finished last week moving back down through the long term key level of 1.30. It did spend the last couple of weeks trading right around the 1.31 level and finding support and resistance at 1.30 and 1.32 respectively, however the former level has now been broken. In finishing the week a couple of weeks ago below 1.30, it moved to levels not seen in over a month and now these falls have been extended.
Over the last month the 1.32 level has become quite significant and has been an obstacle to the Euro moving higher (evident in the right half of the daily chart below). During this time, it has had some periods of little movement followed by sharp bursts. A few weeks ago, the Euro exhibited a classic pin bar reversal candlestick pattern which was indicating the significant selling pressure it experienced at any price above the 1.32 level and likely lower prices to follow. This reinforced the significance of the 1.32 level and how it was going to take considerable effort to move through there. On this pin bar, it moved to near 1.325 and to its highest level in more than two months, since the end of February when it was falling heavily from up near 1.34. Just as quickly, it has fallen away and now moved down to the six week low below 1.28. Prior to that, it was quiet and spent the most part of two weeks ago trading within a narrow range between 1.30 and 1.31, which reinforced how significant this two cent range was. In the middle of April the Euro surged up towards 1.32 and ran into a wall of resistance at that level, to then be followed by a sharp fall back towards the then support level at 1.30.
Over the last month the Euro has done well to weather the storm through February and March which saw it fall sharply from around 1.37, although its decline over the last couple of weeks may be reversing this good fortune. Despite its strong rally in the first half of April, it was only a few weeks ago that the Euro dropped to its lowest level since the middle of November around 1.2750, so it did very well of late to move back strongly above 1.30, despite its recent lapse. The Euro has spent the best part of the last month consolidating above the key 1.30 and 1.29 levels after its decline throughout February. Over the last couple of weeks, the 1.30 level has been called upon again to prop up price, although it may have reversed roles now as it is providing some resistance to movement higher. Sentiment has completely changed with the Euro and the last couple of months has seen a rollercoaster ride for the Euro as it continued to move strongly towards levels not seen in over 12 months above 1.37 before falling very sharply to below 1.28 and setting a 14 week low a month ago.
Meanwhile, the Eurozone continues to struggle, with many of the major economies suffering from recession. Germany, considered the locomotive of the Eurozone train, is also having a tough time of it, as underscored by last week’s disappointing data. ZEW Economic Sentiment, one of the most important German releases, came in well below the estimate. German CPI and WPI posted declines, indicating weak activity in the economy. GDP posted a slight gain of 0.1%, but this was below the 0.3% forecast. If the Eurozone is to have any hope of getting back on solid economic footing, it will need Germany to lead the way. Will we see a rebound from German numbers this week?
EUR/USD May 21 at 03:20 GMT 1.2879 H: 1.2904 L: 1.2836
During the early hours of the Asian trading session on Tuesday, the Euro is trying to rally back towards 1.29 after having recently fallen away from resistance at level back to 1.2870. Since the start of February, it has fallen sharply from new highs above 1.37, although it has experienced some strong rallies in that time trying to claw back lost ground. Current range: trading right around 1.2870.
Further levels in both directions:
• Below: 1.2800.
• Above: 1.2900, 1.3000, and 1.32000
(Shows the ratio of long vs. short positions held for the EUR/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)
The EUR/USD long position ratio has risen sharply in the last couple of days as the Euro has fallen back down below 1.29. The trader sentiment remains in favour of long positions.
Economic Releases
- 01:30 AU RBA minutes of prior May meeting
- 04:30 JP All Industry activity index (Mar)
- 08:30 UK CPI (Apr)
- 08:30 UK Input & Output Prices (Apr)
- 08:30 UK ONS House Prices (Mar)