Well the Euro zone crisis is far from over as well all know, but you can’t beat a bit of positive sentiment and the Euro has caught a bid tone in the last week as further position unwinding (of long CHF and JPY i.e safe havens and to a lesser extent £) allied to early repayments of the ECB 3 year LTRO really gave the bulls something to get their teeth stuck in to.
Indeed recent stats from the US Commodity Futures Commission show net long positions on the Euro reached their highest level for some 18 months as some of the market nerves surrounding fiscal cliff and risk assets waned a little and with a break of the key 1.3400/05 level last Friday we were off to the races. The Euro is bid!
Update: EUR/USD Breaks 1.35 – What are the next levels?
This is a contribution by Richard Wiltshire, Chief Foreign Exchange Dealer at ETX Capital. We provide spread betting on forex and other markets.
That is, until we run in to the brick wall that is 1.3500 area (0.8580 EURGBP and 123.35 EURJPY) and we start to try and make a decision if the prevailing trend is going to kick on, or whether a reversal is due.
EURUSD faces a key resistance area at 1.3480/00 with talk, nay evidence, of offers “stacked up” (1.3488 the 2012 high/ 1.3480 last Friday/ 1.3491 today !) and options related sellers aggressively looking to protect 1.3500, but it is not alone.
The S&P 500 and Dow are also banging away against resistance levels and continuing failure to clearly breach these may prompt further profit taking (we have witnessed bouts of it over the last 24 hours) and an elongated period of “consolidation” could open up a short lived but painful down side squeeze before any uptrend can resume.
To this extent the 1.3380/1.3400 level again becomes focal as it was resistance on the way up and pivotal for short term direction and whereas a break to the topside would trigger stops and open up, dare we say it , 1.4000 while a break below 1.3380would suggest the uptrend is a little over exhausted and suggest a test of 1.330/10 may be on the cards.
This sideways consolidation won’t last, and my gut feeling is the topside will break and when it does with some vengeance, but as always it’s a matter of timing and with a data laden end of week in store, the relative calm of the last 48 hours looks set to be broken sooner rather than later.