Forex: EUR/USD Consolidates At 1.3050 After Failing To Break The 1.3100

Includes: FXE, UDN, UUP
by: FXstreet

The EUR/USD traded in recovery mode on Thursday following the Wednesday sell. Early in the day, the pair rose from 1.30 lows to test the 1.3100, but Euro didn't have enough punch and the pair was rejected at this level to price back around the 1.3050.

The day started with a fresh wave of risk appetite, but rumors that the French bank Societe Generale (OTCPK:SCGLF) suffered big losses caused a moment of panic around the financial markets with equities and riskier currencies plunging. Then a bath of disappointed economic data and corporate earnings in the United States fueled the investors' concerns.

At the moment, the EUR/USD is at 1.3050, 0.15% above opening price but slightly bearish according to the trend index. Indicators such as CCI and Momentum are pointing lower while the MACD and the Stochastic are neutral in the 1-hour chart. As for the short term, next resistance levels are located at 1.3108 (MA55d) followed by 1.3202 (high Apr.16) and then 1.3229 (50% of Feb.-Apr. slide). On the flip side, a violation of 1.3001 (low Apr.17) would open the door to 1.2963 (low Apr.8) en route to 1.2959 (MA21d).

Heat Map euro dollar
(Click to enlarge)

In a wider picture, "key fresh demand (bullish appetite) lies at 1.2930/1.29, as per the April 5th drop-base-rally, which actually, if drilled down to a lower timeframe, turns out to be a level on top of level," comments the analyst's team. "Thus adding weight to a potential rebound for a long play should other 'odd enhancers' align. On the upside, it will likely see an imbalance in favors of sellers at 1.3120/40, a swap level."

Quoting the Societe Generale's point of view, the French bank believes that the EUR/USD price can move to 1.2000. Sebastien Galy, Senior FX Strategist at Societe Generale, states that the US economy is and should steadily outperform leading to an outperformance of US assets. He believes that the ECB will be dragged and forced into action but will stick ever more closely to its inflation mandate. "OMT is unhelpful and by the time we get there, the house is already burning to the cinder blocks," affirmed Galy.

Commerzbank analyst Karen Jones commented in a recent report that the EUR/USD is likely to resume down move towards 1.2740 as the pair failed at the 1.3225/50% retracement once again. "Current indications remain that the market will remain capped here (Elliott wave count and TD perfection set-up) and we look for the resumption of the down move. Intraday the market has found some support at 1.3000/1.2995 and this guard the 200 day ma at 1.2922 en route to the 1.2740 recent low."

However, UBS Strategists, Gareth Berry and Geoffrey Yu, think that the euro is offering mixed outlook in the technical perspective. In particular, "the EUR/USD maintains a neutral outlook, as there is a support at 1.2974, ahead of 1.2920, meanwhile resistance lies at 1.3228."

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.