Techs – Despite the setbacks seen thus far today, the pair has been well supported in the 1.2700’s over the past several days and could be once again looking to base out by Monday’s low at 1.2705. A bullish hammer-like close on Monday is encouraging and we would expect to see some positive follow through into the US session with gains accelerating on a break back above 1.2915 (today’s high). All relevant moving averages currently reside above the market and this would suggest that the pair is somewhat overextended and likely to revert back to its mean. Nevertheless, the overriding structure remains grossly bearish and we will only look to establish fresh longs on a break back above 1.2915. Strategy: BUY @ 1.2920 FOR A 1.3330 OBJECTIVE, STOP @1.2690.
Fundamental Catalyst – Improved market sentiment, increased global risk appetite and higher global equity prices is the name of the game here. The performance in the Euro has been directly correlated with the performance in the broader equity markets, with the continued slide in prices and deterioration in the global economy weighing heavily on the single currency. However, we are starting to see some potential for stabilization as reflected by daily flows. There has been a very noticeable pattern of late in which the Euro has been sold in the Asian and European sessions and then bought back more aggressively into the US session. Today, the currency is trading by daily opening levels and has failed in attempts to break lower. This in conjunction with the price action in USD/JPY which also trades marginally higher on the day should be used as a gauge for risk appetite and as such could act as the catalyst for some liquidation of safe haven trades.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
To contact the author of this report, e-mail jskruger@fxcm.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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