Euro/dollar recovered after the falls, but didn’t really go very far. It seems that some progress has been made both in Spain and in Greece, but uncertainty remains high. Meetings of the Eurogroup and a speech by Mario Draghi are the main events in a busy week. Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD.
Mario Draghi didn’t provide any big news in the rate decision, apart from clarifying that the bond buying program is fully ready, awaiting a Spanish aid request, that hasn’t happened so far. Will Spain wait another week, after regional elections? In Greece, there seems to be an agreement about privatization but many other issues remain open. The government estimates that its coffers will run dry by the end of November. In the US, the positive NFP and unemployment rate improved the global mood and hurt the dollar, but this could eventually backfire.
* All times are GMT
EUR/USD Technical Analysis
€/$ started the new quarter with a leap, but couldn’t break above the 1.2960 (mentioned last week) at first. Towards the end of the week, the pair finally broke higher and also crossed the important 1.30 line.
Technical lines from top to bottom:
1.3615 provided support to the pair when it was trading at elevated levels back in the fall of 2011. 1.3550 served as a cap at that same period of time.
1.3480 is very important resistance: it was the peak seen in February. At the time, it was very stubborn. 1.3437 is of historic significant and is a minor line now.
The round level of 1.34 is a strong cap after serving as such during March. 1.3290 worked as resistance for the pair during April and is also of importance.
1.3170 worked very well as a double top during September 2012 and is now the top frontier. 1.3105 provided some support in April and is a weak line at the moment.
1.3060, was a clear separator in May and also had an important role beforehand. It slowed the rally in September 2012 and is still very relevant.
The very round 1.30 line was a tough line of resistance for the September rally. In addition to being a round number, it also served as strong support. It is now becoming more pivotal and a battleground. It is closely followed by 1.2960 which provided some support at the beginning of the year and also in September.
1.29 is a round number that also provided support when the euro was tumbling down back in May. 1.2814 was the peak of a recovery attempt in May and also capped the pair in September 2012.
1.2750 capped the pair after the Greek elections and also had a similar role in the past. It is weaker now. 1.2670 was a double bottom during January and was the high line of the recovery before the Greek elections in June. It also capped the pair at the beginning of July 2012.
1.2624 is the previous 2012 low and remains important as also seen at the end of August, when it served as resistance. Below, 1.2587 is a clear bottom on the weekly charts but after holding the pair down for a while, but it is weak now.
Long Term Downtrend Working Again
The line starting from February at the 1.3486 peak was formed in March and April. The rally sent the pair surging through this level, as the graph shows. The pair flirted with this line again and again. the recent move towards this line proved to work again as sending the pair away from the line and higher.
I am bearish on EUR/USD
Uncertainty remains high in Europe, and it seems that no breaking news will be announced until we get closer to the October 18-19 summit. This is especially relevant regarding Greece, where negotiations are endless. Even if Spain finally makes the bailout request (although it isn’t likely before October 21st), this move is mostly priced in, and we could get a “sell the fact” reaction.
In the US, the jobs reports was relatively positive, especially when looking at the big revisions. This will not impact the Fed decision, which is too close to the elections, but will certainly impact the political debate.
For an alternative technical view on the euro after the NFP, see EUR/USD Headed for Even Higher Resistance? by Matthew Lifson.
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