Euro/dollar climbed within the range, despite the reawakening of the debt crisis in the larger euro-zone countries. The week ahead provides important surveys as well as inflation figures, which became more important since the last rate decision. Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD.
Worries about Spain were heard left, right and center and yields rose once again. The chances of another bailout for Portugal or a restructuring are higher on the agenda. Also the growing signs of a deeper recession don’t shine on the euro. In the US, a wide variety of speakers provided a wide array of views. For some, QE3 is still on the agenda, and this weighed on the dollar. How will the pair end the first quarter?
* All times are GMT
EUR/USD Technical Analysis
Euro/$ started the week with a jump, and from there it saw range trading throughout the week: between 1.3135 and almost 1.33, finally closing at 1.3268.
Technical lines from top to bottom:
Note that some lines have been modified since last week. 1.3615 switched from support in October to support in November and is now resistance and remains far. 1.3550 capped the pair in November and December and marked the beginning of the plunge.
1.3486 was a distinctive double top in February 2012 and is a strong cap. It’s closely followed by minor resistance at 1.3437. The pair struggled there.
1.3360 provided some support in February 2012, when the pair was trading on high ground, and is now weak resistance. Quite close by, 1.33 was tough resistance 4-5 times, with two attempts very recently. It remains key resistance.
1.3212 held the pair from falling and switched to resistance later on. It now returns to support but isn’t that strong. This was the bottom border of tight range trading in February. 1.3135 provided support for the pair in late March 2012 and is now key support for the recent range trading.
1.3080 provided some support in March 2012 and also had a role in early 2011. The round number of 1.30 is psychologically important and is now stronger than earlier. It managed to keep the pair from falling.
The 1.2945 line is stronger once again and still provides support. 1.2873 is the previous 2011 low set in January, and it returns to support once again. This is a very strong line separating ranges.
1.2760 is a pivotal line in the middle of a recent range. It provided support early in the year. 1.2660 was a double bottom during January and the move below this line is not confirmed yet. 1.2623 is the current 2012 low, but only has a minor role now.
The reaction in markets to the strong jobs report resembles a similar move in December 2009, and could point to an avalanche in EUR/USD. See the charts here.
I turn bearish on EUR/USD
With less euro shorts to squeeze, growing fears about Spain, a delay in Greece’s foreign law PSI, the threat of the IMF to cut off Greek aid if more cuts aren’t made soon, and the inability of the pair to rally, it can now turn south, and confirm thehead and shoulders pattern.
In the US, housing remains depressed, but employment continues improving. Bernanke can always spoil things for the dollar, but the general direction is dollar-positive in the long term.
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