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EUR/USD’s Test of Resistance Offers Scalping Opportunity

EUR/USD’s Test of Resistance Offers Scalping Opportunity

2010-07-26 15:02:00
John Rivera, Currency Analyst
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The Euro has quieted following the results of the European bank stress tests as markets debate its merits. The integrity of the tests has come under question which has detracted from the fairly positive results. Risk sentiment may continue to hold influence over the pair despite its declining correlation. Corporate earnings have been a driver of price action for broader markets but this week’s calendar lacks the name recognition of last week which could see overall markets quiet adding to the case for targeting the EUR/USD as a scalping target.

Key Technical Levels

SR-10-07-26_body_SR-10-07-26-01.png, EUR/USD’s Test of Resistance Offers Scalping Opportunity

The 61.8% Fibonacci extension from the 1.3693-1.1877 decline is a significant resistance level which has limited upside potential. Considering the pair has been in an extend e rally the point may become a point of inflection which could see price action consolidate further as market participants debate direction. A short-term triangle formation also adds to the case for condensed price action with the trend lines offering target levels for entering and exiting positions.

SR-10-07-26_body_SR-10-07-26-02.png, EUR/USD’s Test of Resistance Offers Scalping Opportunity

Quantitative Metrics

The EUR/USD’s has seen volatility quiet as the debt crisis continues to fade and the stress tests are in the rearview mirror. The pair’s ATR has fallen to 153 pips which places it in the middle of the majors. However, the pair’s Bollinger band has widened to 933 pips as it continues its rally. The one-way price action isn’t conducive to scalping strategies and raises a red flag. On a positive note we have seen one week implied volatility readings fall as market fears have eased following the stress tests.

SR-10-07-26_body_SR-10-07-26-03.png, EUR/USD’s Test of Resistance Offers Scalping Opportunity

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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com

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