EUR/USD for Monday, February 11, 2013
The Euro finished last week falling strongly down to nearly three week lows below 1.34. Earlier last week, it did well well to bounce off support at 1.35. The last week or so has seen a rollercoaster ride for the Euro as it continued to move strongly towards levels not seen in over 12 months above 1.37 before falling very sharply to back below 1.35 and now falling even further in the last few days. Back in January, the Euro had been running into a brick wall of supply at 1.34 which was a previous resistance level earlier last year. The Euro was trading back and forth between the two key levels of 1.33 and 1.34 and at the end of last week, the latter level was called upon to halt the strong fall which it did temporarily.
It was only a few weeks ago now that the Euro was placing strong downward pressure on the key 1.33 level which ended up holding up very well and providing a solid base for its recent surge higher. Now that the Euro has broken through 1.34, there is little doubt that 1.33 will have a role to play again.
On Thursday the Head of the European Central Bank issued a confusing statement. Draghi’s remarks indicated that the ECB might cut its inflation projections as early as next month if the ‘single unit’ continues to appreciate. European leaders have finally agreed a budget deal for the rest of the decade after a marathon 25-and-a-half hour negotiation session in Brussels, that will lead to the first cut in EU spending in its 56-year history.
(Daily chart / 4 hourly chart below)
During the early hours of the Asian trading session on Monday, the Euro has just started to move higher from around 1.3360. The Euro has fallen sharply from new highs above 1.37 in the last week or so, followed by a strong rally back to 1.36, before collapsing further to three week lows below 1.34 recently. Over the last month, the 1.33 and 1.34 levels have emerged as key levels and towards the end of last week, the latter was called upon to offer support. On the way up to 1.37 a few weeks ago, the 1.35 level was dealt with quickly as was the 1.36 level late last week. There are now several levels likely to offer support over the longer term should the Euro ease off from its present trading levels. Eg. 1.34, 1.33, and 1.3150. Current range: sitting just below 1.34.
Further levels in both directions:
• Below: 1.3300, 1.3100 and 1.2800.
• Above: 1.3400, 1.3500 and 1.3600.
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 ratio hasn’t moved much since late last week, although it did move to above 40% long positions last week for the first time in nearly a month, as the Euro fell heavily back down below 1.34. Trader sentiment continues to be biased in favour of short positions.
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