The euro to dollar exchange rate is today seen testing the top of its well-worn range, trying now to break back in.
The bulls and bears are involved in an almighty fight in the 1.14s. No doubt, the outcome of the all-important non-farm payrolls event later today will be closely watched for guidance.
After temporarily breaking out above a long-term sideways range the EUR to USD exchange rate rose to 1.1614 and then stalled before nosediving back down to earth.
It found support at the range highs in the late 1.14s and is now trying to break even lower, back inside the range. If successful this would prove the upside break was false and return the advantage to bears.
It is currently trading at the lower boundary of the range highs at 1.1439 level.
A break below this could lead to a stronger downside capitulation for the currency pair, with some analysts seeing a failure to hold 1.1465 as the key determinant to defining a new bear trend.
“The old resistance that is new support at $1.1465 was held by yesterday’s low (to the pip) and so far today remains intact. However, the pressure for a correction remains and a close back below $1.1465 could open for a deeper move lower, with $1.1395 and $1.1330 the subsequent supports.” Write’s online broker Hantec’s Richard Perry.
Given a break below 1.1465 has already occurred, the next target must be 1.1395, according to Perry’s analysis.
Technical analysts Karen Jones and Axel Rudolph of Commerzbank also highlight the significance of 1.1465 as a major support and resistance level, but remain bullish on balance until the 1.1302 level is broken, which, if it happened would open the way to a 1.1216 target at the “April trough”:
“Support can be seen initially at 1.1495/65 (October 2015 high and the April 2016 high) and we will need a slide back below here and preferably the three month support line at 1.1302 to alleviate upside pressure and target the 1.1216 April trough.”
Lloyds Commercial Banking see things as having turned marginally more bearish in the short-term:
“The technical set-up is moving a little more bearish in the near term.”
For them, however, the key support level to watch is at 1.1420, which means it has still held. This probably corresponds to the lower band of the range high hinterland:
“US payrolls tomorrow is likely to dictate the next main move, but we have seen a significant turnaround in the broader USD index to test important resistance levels. Key supports we are watching in EURUSD are, 1,1425 then 1.1355-1.1320.”
Lloyds’s Robin Wilkins comments that a move higher could still reach 1.18 eventually, or even 1.23.
This echo’s recent forecasts made by Sweden’s Handlesbanken, who also suggest a short-term target arrived at by analysis using wave theory and fractal analysis:
“We still have not taken out the 1.1714 high, which previously led us to believe that the consolidation was taking the form of a narrowing triangle. We think this option appears less likely, especially as this option is negated in the case of the US dollar index. This suggests that we should see a test, and a probable break, of the 1.1714 highs, with the price stopping at around 1.18.”
However, Handlesbanken’s FX analyst, Pierre Carlsson, is bearish overall, seeing a sell-off to parity eventually happening, after the summer and the spike higher to 1.18:
“We recommend selling EURUSD on rallies, as we expect it will trade lower after the summer.”
BNP Paribas, also see the same trajectory for EUR/USD as Handlesbanken, but with different timescales, as although they expect a break lower towards the 1.04 lows, they see this has not happening until 2018, as they expect the Fed to stay on hold during the rest of 2016 and 17.
Up until then they expect the EURUSD to remain at elevated levels due to support from the eurozone’s burgeoning current account surplus and the ECB taking their hand off the ‘printing presses’.