This article considers the important technical levels at which those betting against the euro could be forced to bail out of their trades.
The euro continues to rally as it recovers from the January sell-off with significant ground being retaken against the British pound, US dollar and Swiss Franc as we near month-end.
Traders who are betting on further declines in the euro, and particularly those who entered late in thee game, will be extremely nervous at the present time.
Indeed, many will have been closed out of the markets in a situation that only accelerates the move as more dollars are bought to settle trades.
Currency Rates at the Present Time
- The euro dollar exchange rate (EUR/USD) is 0.45 pct higher than it was at the time markets closed last night and is at 1.1339.
- The euro pound exchange rate (EUR/GBP) is 0.83 pct higher than at the market close and is quoted at 0.7518.
- The euro franc exchange rate (EUR/CHF) is a full 2% higher and is quoted at 1.0416.
How Far will the Euro’s Recovery Extend?
Just how far will the euro recover? We analyse the technical setup behind the EUR/USD as this headline rate will largely dictate direction in the crosses – i.e when the euro dollar rally stops the euro pound rally should also cease.
Of course the extent of each move will differ greatly, but what we are interested in here is direction and trend.
With this in mind we hear from Bank of America Merrill Lynch’s MacNeil Curry:
“For the past 4 days, €/$ has been correcting higher. Now that correction looks to have completed (a zig-zag formation for those who follow Elliott Wave analysis) and the larger bear trend is set to resume.
“A break of 1.1224 (Jan-27 low) would confirm a resumption of the larger bear trend for 1.10000 (round number) ahead of 1.0765 (Sep’03 lows) and eventually below.
“A move above 6wk trendline resistance (now 1.1494) would be the 1st sign of trouble for €/$ bears, but it would take a break of 1.1679 (Jan-21 low) to point to a near term base and turn in trend. To be clear, we do not expect a break of either of these levels, but the risks must be highlighted.”