European Summit Brings iShares MSCI EMU ETF Into Sharp Focus

 |  About: iShares MSCI EMU ETF (EZU), Includes: ADRU, DFE, EKH, EPV, EUFN, FDD, FEP, FEZ, IEV, UPV, VGK
by: Stoyan Bojinov

Equity indexes took a dive lower as many investors stepped to the sidelines in anticipation of today’s key European summit in Brussels. Selling pressures hit Wall Street on Thursday after the European Central Bank cut rates as expected, but disappointed investors when it announced that it would not continue its bond repurchase program. On the home front, jobless claims fell by 23, 000, although the positive news was overshadowed by ongoing anxiety surrounding the Euro zone debt drama. Profit taking struck quick and hard in the gold futures market as prices for the precious metal plunged just before the opening bell, settling near $1,710 an ounce for the day.

All eyes and ears will be focused on the European leaders summit in Brussels later today, which makes the iShares MSCI EMU Index Fund (NYSEARCA:EZU) our ETF to watch for the day. EZU measures the performance of equity markets of the Euro zone member nations who have adopted the euro as their currency, and it could see an increase in trading volumes as investors scramble to adjust their positions after the latest news surrounding the debt burdened currency bloc hits the street [see EZU Holdings].

Chart Analysis

When considering the chart below, it’s apparent that bullish momentum in EZU declined considerably after the ETF topped out at $42.22 a share on 5/2/2011. After sinking below its 200-day moving average (yellow line) in mid-July, this ETF encountered serious selling pressures over the next few months as European debt woes resurfaced and stole the limelight; escalating uncertainty stemming from the financially fragile currency bloc paved the way lower for EZU, as it sank all the way down to a recent low at $25.57 a share on 9/23/2011.

click to enlarge

Click to enlarge

Investors should note that EZU has considerable support near the $26 mark, seeing as how it recently held support above this level four times: first on 9/12/2011, then on 9/23 and 10/4, and most recently on 11/25/2011 [see EZU Returns].


The Euro zone has been the center of attention as investors have kept a close watch on just how lawmakers plan to restore stability and spark growth in the debt burdened region. The summit in Brussels later today should provide investors with some insights regarding the comprehensive “rescue plan” that has been the center of attention all week [see Global X Debts First Greece ETF (NYSEARCA:GREK)].

In terms of upside, EZU could rally back above $30 a share if investors react positively to the latest developments overseas. On the other hand, EZU could re-test the $26 level if selling pressures develop and bearish momentum takes charge. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Disclosure: No positions at time of writing.

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