Case Building For EUR/USD Volatility? Range Break Just Pips Away

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 |  Includes: ERO, EU, FXE, UDN, UUP
by: FXstreet

Another thin trading session this Monday in Asia-Pacific to start the week, with EUR/USD last at 1.2826, bouncing from a double session low at 1.2815. The pair started the session with a gap lower in the pre-opening interbank market. But while it managed to close it at session highs of 1.2840 afterwards, it was snapped back lower again, printing the second intraday low and making a total of 25 pips range in between, ahead of European trading.

The London session ahead will lack major macro EUR related data, with only Spanish unemployment figures at 08:00 GMT, and EU Sentix investor confidence at 09:30 GMT, but instead, several political events will be taking center stage, starting with the second day of meetings at Mexico DF from the G20. Greece will also be in the spotlight as the government will try to pass a new austerity package in Parliament, with a 2-day strike threat in Greece set for tomorrow. No major EZ sovereign debt auctions for today. European share markets are pointing to a slightly higher open according to futures.

Analysts like the EUR/USD short idea

In-house Chief Analyst Valeria Bednarik, anticipates the risk for further selling round on the EUR/USD "as bearish momentum remains strong despite oversold readings, while in the 4 hours chart technical also favor the downside" she notes. The trader sees 1.2800 as key level, and once below, not much stands in the way of bears until 1.2745; a daily close below the latter eyes 1.2610, Valeria thinks. For the short term, "expect sellers to align in the 1.2880 support turned resistance" she says.

According to Chris Capre, Founder at 2nd Skies:

Now the EUR/USD is threatening to break the weekly 20ema which hasn't been done in almost two months. Should the pair take out this defense, the next key support levels would be the 1.2751 and 1.2645 levels. Bears meanwhile can look to sell on rallies to the 1.3000 level.

Meanwhile, Sean Lee, Founder at FXWW, notes:

We've had a number of weeks of sideways trade but that's about to end in my opinion, so forget about trying to pick the right direction all the time and put your trading cap on!" Is it possible that we see levels near 1.2650 this week? Absolutely! Is it possible that we see levels near 1.3200 this week? Absolutely! I'm hoping that we finally get a market where quick-witted traders can have a definite advantage.

After last Friday's upbeat NFP release, Saxo Bank entered a fresh short on the EUR/USD, expecting now a move somewhere around 1.26 in the near future. Saxo Bank sell signal was activated at 1.28419, placing a stop at 1.29355 bid, John Hardy, Head of FX Strategy at Saxo Bank, comments in a research note.

Watching the key levels, immediate support to the downside comes at previous 3-month lows from October 1st at 1.28 round, followed by June 18 lows and 38.2% Fibonacci retrace of up leg 1.2037/1.3176 at 1.2750, and June 29 highs at 1.2693. To the upside, closest resistance shows session highs 1.2840, followed by October 26/29/30 lows at 1.2885, and November 01 lows at 1.2923.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.