EUR/USD: Eases Away From Resistance Level At 1.37

EUR/USD for Monday, October 21, 2013

The Euro enjoyed a strong surge higher in the couple of days to finish last week sending it to its highest level since January this year, touching above 1.3700. For the most part over the last month or so the Euro has traded within a narrow range between 1.3450 and 1.3650 although in the last couple of weeks this range had narrowed down to between 1.35 and 1.36. The former level of 1.35 was strongly tested earlier last week 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. A few 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.

EUR/USD hit an eight-month high just shy of 1.3704. The 17-member single currency would probably have to climb even higher hurdles before Draghi and his fellow policy cohorts at the ECB raises any concerns. The market has yet to hear from the Euro exporting sector – they will be the first to feel the pinch in a fragile euro economy. The strength of the EUR is not directly related to the currency itself, but because of the general malaise of the "mighty" dollar. The likelihood that the Fed, and in particular the new Fed head, will extend its expansionary monetary policy has caused the dollar to take a "swan" dive now that US government partial shutdown and debt ceiling has been seen to, at least for the time being.
EUR/USD Daily Chart" title="EUR/USD Daily Chart" src="https://d1-invdn-com.akamaized.net/content/picc887c61938e4b94407f321359ff5362a.gif" height="271" width="550">

EUR/USD October 21 at 01:30 GMT 1.3673 H: 1.3688 L: 1.3670
EUR/USD Technical" title="EUR/USD Technical" src="https://d1-invdn-com.akamaized.net/content/picda6e52cb5f7d3889a95c77517ce0fac3.png" height="100" width="597">
During the early hours of the Asian trading session on Monday, the Euro is just easing away a little from the resistance level at 1.37. Current range: trading just above 1.3670.

Further levels in both directions:

• Below: 1.3500 and 1.3200.

• Above: 1.3700.

OANDA’s Open Position Ratios
EUR/USD Open Position Ratios" title="EUR/USD Open Position Ratios" src="https://d1-invdn-com.akamaized.net/content/pice034ae5d1a627b42dd26b27b302621d3.gif" height="42" width="678">
(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 slumped to near 20% as the Euro has surged higher towards 1.3700. The trader sentiment remains strongly in favour of short positions.

Economic Releases

04:30 JP All Industry activity index (Aug)
05:00 JP Leading indicator (Final) (Aug)
12:30 CA Wholesale Sales (Aug)
14:00 US Existing home sales (Sep)

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