By Stuart McPhee
Over the last few days the Euro has been consolidating around the key 1.35 level after it fell sharply to a six week low in the week before. After consolidating around the key 1.38 level for around a week, the Euro has finally let go and made its way sharply back to below 1.35 where it is presently trying to hold on to. A few weeks ago the Euro enjoyed a strong surge higher to move through to its highest level in nearly two years just above 1.38 before spending that week content to consolidate around this level. It moved quite well throughout the middle of October after breaking higher from its sideways range. For the month leading up to that, the Euro traded within a narrow range between 1.3450 and 1.3650 before the range narrowed down to between 1.35 and 1.36. The former level of 1.35 was strongly tested a few weeks ago and has resurfaced as a significant level presently.
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.
The euro zone's economic recovery lost a little momentum last month, according to surveys that showed only modest growth in German and French businesses. Data from non-euro zone Britain impressed again, however, and German industrial orders jumped underlining the uneven nature of overall European recovery. Wednesday's purchasing managers' indexes (PMIs) from Markit showed the pace of growth in euro zone businesses slipped last month, although not nearly as badly as first projections. Taken as a whole, the indexes pointed to fragile economic growth that will do little to ease the pressure on the European Central Bank to take some action, although not perhaps at its policy meeting on Thursday. With surprisingly low inflation last month, speculation in markets and among economists has grown that the ECB is primed to stimulate the economy again - perhaps next month.
(Daily chart / 4 hourly chart below)
EUR/USD November 6 at 21:05 GMT 1.3521 H: 1.3547 L: 1.3488
During the early hours of the Asian trading session on Thursday, the Euro is trading within a narrow range between 1.3520 and 1.3525 after its surge higher in the last 24 hours. Current range: just above 1.3520.
Further levels in both directions:
• Below: 1.3400.
• Above: 1.3550.
OANDA's Open Position Ratios
(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 surged up above 40% as the Euro has dropped sharply back down to around 1.3500. The trader sentiment remains in favour of short positions.
- 00:30 AU Employment (Oct)
- 00:30 AU Unemployment (Oct)
- 05:00 JP Leading indicator (Prelim.) (Sep)
- 12:00 UK BoE MPC - APF Total (Nov)
- 12:00 UK BoE MPC - Base Rate (Nov)
- 12:45 EU ECB - Interest Rate (Nov)
- 13:30 EU ECB President Draghi gives press conference following interest rate announcement
- 13:30 US Core PCE Price Index (1st Est.) (Q3)
- 13:30 US GDP Annualised (1st Est.) (Q3)
- 13:30 US GDP Price Index (1st Est.) (Q3)
- 13:30 US Initial Claims (01/11/2013)
- 20:00 US Consumer Credit (Sep)
*All release times are GMT
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