Inside the Currency Market: Current Range On EUR/USD Expected To Remain

As Eonia again turned negative at minus 0.016, Euribor 1 and 2 week funds negative at minus 0.021,and minus 0.020 and German yields negative between 1- 3 year, the current ECB dilemma resembles the 2012 Greek crisis. Then, Eonia, Euribor and German yields all turned negative and the EUR/USD saw its 1.2756 lows.
What rescued the EUR to see its 2014 highs in the 1.3900's two years later was the ECB's introduction of the Securities Market Program. The ECB embarked on purchases of Government bonds from its monetary base to provide liquidity to European states. This time the ECB launched the Targeted Long Term Refinance Operation (TLTRO) to improve bank lending to the non financial private sector through 2 year loans. The first auction begins this week and will determine the directional fate of the EUR/USD's next leg. A successful auction may provide EUR/USD support, likewise a failure may see a further drop.

The EUR/USD range is found between long term averages at 1.2234, 1.2254, 1.2500 below and 1.3402 and 1.3451 above. Shorter term, the range is found between a rising line at 1.2500 and a stasis line at 1.3402. As price drops further, it becomes oversold from 1.2500 and overbought on any approaches to 1.3402. The current range is not expected to break anytime soon. Enough supports exist below based on long term averages to prevent a 1.2500 break in the near and possible long term.

Support points below to 1.2500 include: 1.2964, 1.2950, 1.2901, 1.2894, 1.2868, 1.2842, 1.2815, 1.2803, 1.2572, 1.2567, 1.2548, 1.2500. To understand the importance of 1.2803, support points in the 1.2700's and 1.2600's are not found.

Resistance points above to 1.3451 include: 1.3027, 1.3096, 1.3109, 1.3148, 1.3230, 1.3297, 1.3340, 1.3372, 1.3402, 1.3451. Only a break of 1.3451 sees far higher prices.

Brian Twomey, Inside the Currency Market, btwomey.com