Euro Dollar Spot Rate (EUR/USD)
(Weekly)
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As you can see from the downward
channel, the general trend of EUR/USD rate is to the downside. The upper bound
of the channel will serve as a resistance while, on the other hand, the lower
bound went below the all-time low @ $1.1876 becoming obsolete to use with.
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In early May, the EUR/USD broke down
on a descending triangle. The descending triangle is formed by the upper downtrend
line and the 2nd resistance @ $1.3, which was previously a flat base.
Statistically, when price rises into a descending triangle, the
pattern is bullish with an approximate 70% chance to breakout on the upside. However,
the failed pattern in this chart indicates that investors at large are bearish on
the Euro, smashing the currency rate passed the 52 weeks low @ $1.2289 and still
heading lower. With the exchange rate sitting at a 2 years’ low @ $1.2256, it
is not recommended to go against the trend and long the Euro at current rate.
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The EUR/USD rate is currently sitting
at the bottom of the range @ $1.2289 - $1.2697 and it has a pretty good chance
to go lower. If the Euro breaks down on the range, the next major support level
will be the whole number @ $1.2. Notice how the Euro previously held support @
$1.3, I'm expecting it to do the same thing when it comes down to $1.2.
Furthermore, the $1.2 level is only a penny above the all-time low @ $1.1876,
it is possible that majority of the investors will wait the Euro to get near
the level before they start making a move. Nevertheless, it is never wise to
long a new low or short a new high, always wait for a few signals to confirm
the trend reversal before you jump in and make a premature decision.
(Daily)
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In the daily chart, I add a 3rd
resistance level @ $1.3286 in case the Euro rises sharply.
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The 3rd resistance level @
$1.3286 was also the initial move of a 1-2-3 down pattern. The 1st
move (highlighted in dark green) took the currency down
to the range bottom @ $1.2289 then retraced. The 2nd move (highlighted
in light
grey) was a consolidation action, setting up for the 3rd
move. With the EUR/USD rate at the edge of breaking lower, there is no reason
for anyone to jump in front of the train and be a hero.
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The study in light blue color is the Fibonacci
Extension. I usually use it to project the 3rd move of a 1-2-3
pattern in order to plan and locate my exit strategy, taking a percentage of my
profit out correspond with the Fib Extension levels. Every time the EUR/USD
rate pushes lower, it should find some support at each percentage level shown
in this study. Notice how the Euro touched the 50% extension level @ $1.2243
and bounced a little bit. If the Euro breaks the 50% level again, 61.8% level @
$1.2124 will be the next support in line.
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If the Euro doesn’t break to the
downside, it most likely will trade within the range @ $1.2289 - $1.2697, use
the range top and bottom as reference to determine the direction of your trade.
I hope this post offers you some insight, thank you for reading and please
feel free to give me some feedback.
I think the USD's not going really strong against EUR these days. Despite the real deep shits happening in Spain, money's well parked and I don't foresee market's gonna move their money out from UK and German bonds to the US one. Given your technical analyses are inspiring, I would like to add a point that the upcoming 2 weeks will probably show a rectangle first ranging from 1.23 + - 0.01.
ReplyDeleteNice article. You got a fan here =)
Hehahelios
First, thanks for your comment and support. And yes, you are probably right, investors don't necessarily invest their money in US bond even they pull their money from Europe. I'm just analyzing whatever i see in the chart and, in fact, the EUR/USD rate hit a new low today @ $1.2234.
DeleteAll i want to say is i still see a lot of weakness in the Euro. Last week, the ECB lower their key rate to 0% -.75%, an all time low, less incentive for people to invest in the area. I also read a couple articles saying investors are selling the Euro due to fear of a Euro zone breaks up. Of course, everyone knows the German bond is one of the safest assets to put their money in, but think about this, if the Euro falls apart, no one knows how their German assets holding will end up, no one know whether the country will go back to the Deutsche mark or continue to use the shared currency. i think that's a risky bet that institutional investors may not want to get too heavy on. Furthermore, i also notice the Danish 2 yrs note is trading around the -.2% territory, indicating some investors are willing to pay in order to keep their money safe.
Thanks for your input again Helios, please do share more with me whatever opinion you have =)
Joe