EUR/USD – Places Pressure on Resistance at 1.33 Again

EUR/USD for Thursday, August 1, 2013

To finish off last week the Euro surged higher to reach a new one month high just shy of 1.33 and for the few days this week , it has met stiff resistance at this level.  It has in the last 12 hours surged higher to move through 1.33 temporarily to get within reach of 1.3350 and reach another one month high before retracing a little back below the resistance level at 1.33.   For the most part of last week the Euro enjoyed a healthy and steady rally towards the resistance level at 1.32 and has finally made its way through culminating in its recent push higher. The 1.32 level had previously presented problems a couple of weeks ago when the Euro surged higher and now resistance around 1.3250 has caused the Euro to roll over and ease back a little to familiar territory around 1.32. As the Euro has just eased away from the resistance level at 1.33, it has found solid support right around 1.3250.

A couple of weeks ago 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. It was a week or so ago that the Euro left its recent trading range between 1.30 and 1.31 and pushed up through the 1.31 level, and even though it has had some quick movement below 1.31 and back again during this period, it has rallied every time to return to above 1.31 demonstrating the support of the bulls. On a couple of occasions last week, it made an attempt to move within reach of the longer term resistance level at 1.32 and now it finds itself trading on the other side of this level. It has been some time since the Euro has experienced a 24 hour period with as much range as the period a few weeks ago when it surged higher. Prior to that jump, the Euro had been in a very solid medium term down trend after succumbing to the resistance at 1.29 and moving down below the key long term level of 1.28. This resulted in it trading at a multi-year low near 1.2750. After reaching a four month high above 1.34 a month ago, the EUR/USD was in the midst of a very solid medium term down trend which has seen it fall sharply. Its decline was slowed a little a few weeks ago as it traded between 1.30 and 1.31 however it then fell strongly again moving down to below 1.28.

It was only a few weeks ago that the 1.30 level was standing up and proving itself to be a brick wall of support, and even though it failed a couple of weeks ago leading to the new lows, it has since been called upon again to offer support over the last couple of weeks. 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 ECB will be in the spotlight on Thursday, as the central bank sets the new benchmark interest rate. However, it is the accompanying press conference with ECB head Mario Draghi, that has moved the markets in recent months. Will Draghi again make some comments that affect the euro? Analysts are betting that the rate will remain the same, as rates are already so low that a reduction would not have a strong impact. The ECB has hinted that it is considering non-conventional monetary measures, such as negative deposit rates and forward guidance. If Draghi mentions that the ECB is considering these steps, we could see the euro point downwards.

(Daily chart / 4 hourly chart below)

EURUSD Technical Analysis Daily Chart.
EURUSD Technical Analysis Candlestick 4 Hour Chart.
EUR/USD August 1 at 01:40 GMT   1.3298   H: 1.3345   L: 1.3208

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3250 1.3150 1.3000 1.3300 --- ---

 

During the early hours of the Asian trading session on Thursday, the Euro is just easing back a little below the resistance level at 1.33 after recently surging higher towards 1.3350.   Since the middle of June, the Euro has generally fallen sharply from new highs above 1.34, and has been looking to return back to the significant lows around 1.2800, however in the last few weeks it has recovered well and moved back to within reach of 1.33 again. Current range: trading right around 1.3290.

Further levels in both directions:

• Below: 1.3250, 1.3150 and 1.3000.

• Above: 1.3300.

 

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 fallen sharply to down near the 30% level as the Euro has surged higher towards 1.33 this week. The trader sentiment remains strongly in favour of short positions.

Economic Releases

  • 01:30 AU Export & Import price index (Q2)
  • 01:30 AU Retail Sales (1st-7th) (Q2)
  • 05:00 JP Vehicle Sales (Jul)
  • 06:30 UK Nationwide House Price Index (29th Jul - 2nd Aug)
  • 07:00 UK Halifax House Price Index (1st-6th) (Jul)
  • 07:58 EU Manufacturing PMI (Jul)
  • 08:28 UK CIPS/Markit Manufacturing PMI (Jul)
  • 11:00 UK BoE MPC - APF Total (Aug)
  • 11:00 UK BoE MPC - Base Rate (Aug)
  • 11:45 EU ECB - Interest Rate (Aug)
  • 12:30 US Initial Claims (26/07/2013)
  • 14:00 US Construction Spending (Jun)
  • 14:00 US ISM Manufacturing (Jul)
  • 21:00 US Vehicle Sales (Jul)

 

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Stuart McPhee

Stuart McPhee

Senior Currency Technical Analyst at Market Pulse
Stuart McPhee has nearly 20 years’ experience as a private trader and he specializes in technical market analysis of major currency pairs. He is the author of several bestselling trading books, most recently the fourth edition of his popular book “Trading in a Nutshell” (John Wiley), and he contributes articles to daily newsletters and blogs. He produces articles and videos on the how-tos of technical trading. Living in Melbourne, Australia, Stuart speaks at conferences and events worldwide.
Stuart McPhee