The 1.34 level has been a thorn in the side of the euro for some time now, however last week it surged higher and moved through to its highest level since February just shy of 1.3570. It finished the week slightly lower, just below 1.3530. Prior to the jump for the last couple of weeks it had reversed strongly and surged back through 1.32 and 1.33 and then started last week with a strong surge higher towards 1.3390 before being turned away from near the resistance level at 1.34 again. In the couple of weeks prior it 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. Despite a couple of rallies back above 1.32 a few weeks ago, it continued to drift lower and fall below 1.3150. For about a week or so a few weeks ago the euro was placing upward pressure on the 1.34 level however it stood firm just like it has done so for the last few months. About a month ago the euro made a run at the 1.34 level only to be turned away yet again and ease back under – this was the story for several weeks. Several weeks ago it retreated heavily from above 1.34 after having reached a six month high around 1.3450.
The surge higher in the few days last week is significant as despite its persistent attempts to push through the 1.34 level on many occasions, it had only been consistently repelled with ample supply. Looking at the bigger picture the euro has spent most of the last six weeks or so trading within a range between 1.32 and 1.34. 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. It has been some time since the euro has experienced a 24 hour period with as much range as the period earlier in July when it surged higher from from below 1.28 up to above 1.32. Prior to that jump, the euro had been in a very solid medium term down trend after succumbing to the resistance at 1.29 and moving down below the key long term level of 1.28. This resulted in it trading at a multi-year low near 1.2750.
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.
Over in Europe, German and eurozone ZEW Economic Sentiment were released earlier in the week, and both posted impressive gains in August. The German indicator climbed from 42.0 to 49.6 points, beating the estimate of 45.3 points. This was the indicator’s best level since April 2010. However, eurozone ZEW Economic Sentiment stole the show, rocketing from 44.0 to 58.6 points, a tremendous gain. This crushed the estimate of 47.2 points, and was the highest level recorded since September 2009. These excellent readings reflect the view of financial market experts that the German and eurozone economies are picking up steam, and further strong data out of the euro would likely lift the euro higher.
EUR/USD September 22 at 22:20 GMT 1.3527 H: 1.3551 L: 1.3524
During the early hours of the Asian trading session on Monday, the euro is consolidating in a narrow range around 1.3530 after having done very little for the last 48 hours of trading. Since the middle of June, the euro has generally fallen sharply from new highs above 1.34, and has been looking to return back to the significant lows around 1.2800, however in the last month or so it has recovered well and moved back to above 1.34 again in the middle of August. Current range: right around 1.3530.
Further levels in both directions:
• Below: 1.3100 and 1.3000.
• Above: 1.3550.
(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 fallen sharply back below 30% as the euro has surged to above 1.35. The trader sentiment remains strongly in favour of short positions.
Economic Releases
- 07:58 EU Flash Composite PMI (Sep)
- 07:58 EU Flash Manufacturing PMI (Sep)
- 07:58 EU Flash Services PMI (Sep)
- 12:58 US Flash Manufacturing PMI (Sep)