EUR/USD at an Important Technical Crossroads as Signs Emerge of an Overextended Euro Rally
Markets are lacking any real direction at the moment which will allow us to focus on technical considerations - hence the views posted below.
The prospect of the Fed reducing its asset purchases in September continues to have a bigger impact than anything else.
"Investors don’t really have too much else to focus on, with the corporate earnings season drawing to a close and the economic calendar looking very light," says Joshua Mahony at Alpari UK, "we could see investors turn their attention back to earnings season briefly this week, with some major retailers due to report second quarter earnings. Consumer spending makes up around two thirds of US GDP so these earnings are actually very important."
Technical Forecasts for the Euro Dollar Exchange Rate: A Crucial Crossroads
ICN Financial Markets say:
"The pair started the week consolidating above key resistance levels that affected the pair since placing the top at 1.3711, and is also stable above 1.3315. Stability above the referred to levels force us to ignore the negative signal on Stochastic and expect to see an upside move this week. Breaking 1.3205 and stabilising below it might change the overall trend this week from bullish to bearish.
"The trading range for this week is among the key support at 1.3115 and key resistance at 1.3620.
"The general trend over short term basis is sideways between 1.2775 and 1.3600 as far as they hold over daily-basis."
Ipek Ozkardeskaya at Swissquote says the mid-term timeframe would favour the US Dollar while short-term the EUR should continue to advance:
"Calm, orderly start to the trading week. EUR/USD rallied to 1.3379 last week but has started this week on a back footing. Despite the temporary bullishness (MACD flat lining above zero line), mid-term, we would remain a seller as bearish indicators will eventual reinstate itself.
"Upside should be capped at 1.3405(8th Aug high). The next support can be found at 1.3230."
Joshua Mahony at Alpari UK says the Euro Dollar exchange rate is at a crucial crossroad:
"The euro has shown resurgent strength over the past months, coinciding with a noticeable improvement in the economic indicators out of the single currency. However the strength of the eurozone comes against a backdrop of an increased perception that the Fed will taper their asset purchases in September, thus strengthening the US dollar.
"Technically speaking, this standoff has brought about a potential bullish trend-line break which could bring about significant upside over the coming months for the pair.
"The weekly chart points to a clear symmetrical wedge formation dating back to early 2011, which if broken would be hugely significant owing to the longevity of the trend.
"Last week saw an attempted break both above and below, yet ended in a doji candle. It is clear that any upside is pinned back by substantial resistance at the 200 week simple moving average and the 1.34 handle.
"Taking a look at the stochastic oscillator, we are clearly overbought, which points to downside propensity should the markets fail to break above the descending trend-line in question.
"We await a substantial indicator, where a break and close above 1.34 would bring a substantially more bullish outlook for the pair with targets at 1.352 and subsequently 1.37.
"However, should we see a downturn over the coming weeks, initial support would likely to come around 1.32, followed by the 50 and 100 week simple moving average.
Luc Luyet at MIG Bank says:
"EUR/USD remains in a succession of higher lows with a significant support at 1.3190 (02/08/2013 low). However, prices are short-term overbought and are close to a strong resistance at 1.3417.
"If a retest, or break over, 1.3417 can be achieved, the region between this key high and the annual high is expected to see a fair degree of resistance and is likely to offer a reasonable short entry opportunity."