EUR/USD, after breaking over 1.3000, moved as expected. The currency pair went as high as 1.3126 but failed to retest the 1.3139 high of October 17th and fell sharply to touch 1.2876 before closing for the week at 1.2927. The sharp fall had briefly broken below the 55-day EMA support but the closing was over this support level.
On one hand the strong support at 200-day EMA and then the sustained price action over 1.3000 psychological level had made the short-term to near-term outlook slightly bullish, This outlook was also strengthened because of the break of the channel resistance after 19 months. But on the other hand and the strong fall before retesting 1.3139 argues with that outlook.
Our immediate outlook for EUR/USD is neutral, even though we expect that further downward moves should take place. As a better indication of further deeper moves, we would like to see some sustained price action below the 55-day EMA and another break below the recent 1.2876. Such a price action should take EUR/USD towards the first towards the support of 1.2785/1.2795 range (the lower edge of daily Ichimoku cloud. In case a break below this support takes place then we would expect some support near 1.2735/1.2740. Any decisive break of this will make the focus turn toward 1.2661 of November 13th first and then possibly below.
However, if the current support levels hold and a break of the high of the recently witnessed sideways move i.e. 1.2973 and then the psychological level of 1.3000 takes place then the focus will turn back towards a retest of 1.3128/1.3139.
Overall the price action has been the reactions of the continuously changing sentiments in the Euro zone. Any small hope about bailouts brings in an upward jump but overall the situation cannot be termed as healthy or bullish. Considering this the overall outlook is not bullish for EUR/USD and in the longer term perspective we are considering these moves just as bigger market noises. As it is clear, the recent upward gains have just completed the 38.2% Fibonacci retracement of the downward move during from the beginning of May, 2011 and July 24, 2012. The currency pair has been finding a strong resistance at that level. Hence the recent upward move (before the current fall) can be considered just as a consolidation in the longer perspective. Further evidence is required by a decisive break over 1.3172 and then 1.3495/1.3500 to conclude that the reversal may be on the way.
For the charts and past evidences mentioned above, you may please check the blog section and weekly analysis pages on ForexAbode.com.
By: Himanshu Jain.
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.