EUR/USD for Wednesday, October 30, 2013
After consolidating around the key 1.38 level for around a week, the Euro has finally let go and has eased back under to a one week low below 1.3750. Earlier last week the Euro enjoyed a strong surge higher to move through to its highest level in nearly two years just above 1.38 before spending that week content to consolidate around this level. It has generally moved well over the last couple of weeks after breaking higher from its sideways range. Since the middle of September the Euro has traded within a narrow range between 1.3450 and 1.3650 before the range narrowed down to between 1.35 and 1.36. The former level of 1.35 was strongly tested a couple of weeks ago and stood tall as the Euro fell heavily a couple of times and was able to receive some solid support from 1.35 before rallying a little higher. Several weeks ago the Euro surged higher through the resistance at 1.3550 to its then highest point since February just shy of 1.3650 only to fall back and receive solid support from 1.3550. For several days the 1.3550 level reinforced itself as one of significance as it provided solid support for the Euro and helped it back to resistance at 1.36.
Throughout August the 1.34 level had been causing the Euro headaches however several weeks ago it surged higher and moved through there to its then highest level since February just shy of 1.3570, which was past a couple of weeks ago moving to just shy of 1.3650. About a month ago the Euro fell strongly away from the resistance level at 1.34 back to below the support level at 1.32 and in doing so traded to its lowest level in seven weeks very close to 1.31. Looking at the bigger picture the Euro spent a lot of August and September trading within a range between 1.32 and 1.34 before recently pushing its range to between 1.3450 and 1.3650. Back in early July the Euro was content to maintain the level above 1.31 and settle there, as it received solid support from both 1.30 and 1.31. On a couple of occasions it made an attempt to move within reach of the longer term resistance level at 1.32 and finally it finds itself trading on the other side of this level and being well established there.
Throughout May and most of June the Euro surged higher to a four month high above 1.34. Before that in the first half of May, the Euro fell considerably from near 1.32 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 was called upon to provide additional support. Throughout this year the Euro has moved very strongly in both directions. Throughout February and March the Euro fell sharply from around 1.37 down to its lowest level since the middle of November around 1.2750. Sentiment has completely changed with the Euro over the last few weeks and the last couple of months has seen a rollercoaster ride for the Euro as it continued to move strongly towards 1.34 before falling very sharply to below 1.29 and setting a 6 week low.
While the euro zone pulled out of recession in the second quarter of the year, Italy’s economy shrank 0.3 per cent. Italy’s problems with sluggish growth date back more than a decade, and have left it with the highest debt burden, as a percentage of gross domestic product, of any European country but Greece. Prime Minister Enrico Letta is backing measures that could give growth a boost, such as tax simplification, regulatory reform, and modernization of the justice system, Finance Minister Frabrizio Saccomanni said in a letter published today in the Financial Times. But after taking office a full two months after inconclusive elections, Letta has spent much of his time fighting political brush fires, most recently surviving an Oct. 2 confidence vote after former Premier Silvio Berlusconi threatened to bring down the government.
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EUR/USD October 29 at 22:00 GMT 1.3747 H: 1.3813 L: 1.3736
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During the early hours of the Asian trading session on Wednesday, the Euro is trying to rally to back above 1.3750 after dropping sharply from above 1.38. Current range: just below 1.3750.
Further levels in both directions:
• Below: 1.3750, 1.3650 and 1.3500.
• Above: 1.3830.
OANDA’s Open Position Ratios
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(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 climbed back towards 30% as the Euro has dropped back below 1.3800. The trader sentiment remains strongly in favour of short positions.
Economic Releases
- 10:00 EU EU Business & Consumer Survey (Oct)
- 10:00 EU Business Climate Index (Oct)
- 12:15 US ADP Employment Survey (Oct)
- 12:30 US Core PCE Price Index (Adv) (Q3)
- 12:30 US GDP (Adv) (Q3)
- 18:00 US FOMC - Fed Funds Rate (Oct)