TECHNICAL ANALYSIS EUR/USD
Euro/dollar was first traded in January 1999, at around 1.1800-1.1900 and fell to a historical low at 0.8231 on October 26th, 2000. From that bottom, the euro began accumulating and – since summer 2002 – moving upwards, entering progressively a major up-trend and reaching a top at 1.6038 on July 15th, 2008 (+95% vs. the historical low). Te fall below the strong support at 1.5275 on August 8th, 2008 (level that had supported the pair in the period April- July) caused a major reversal, with a strong decline and a new bottom at 1.2330 at the end of October, 2008 (during the worsening of the financial crisis). Since March 2009 the euro tried to recover and reached a peak at 1.5145 at the end of November 2009. From that level the pair started to decline again, with a sell-off at the break of 1.3000 and a new low at 1.1876 on June 7th 2010, on the levels of beginning 2006. Ten the euro started rising again, with a top at 1.4282 on November 4th, 2010. Te following correction exhausted at 1.2867 on January 10th, 2011. From that level, a new rally brought the pair to a peak at 1.4940 on May 4th.. From that level the selling pressure resumed again . From late October’s top around 1.4250, the Euro underwent
a strong fall with a low at 1.2623 on January 13th 2012. Te following rally brought the pair back to the test of the strong 1.3500 resistance (high 1.3487 on February 29th), but then the euro declined again towards 1.3000. A break of the key support area 1.2865-1.3000 would likely trigger a sell-off for the euro, starting a strong downward trend: the first important target would be the 1.2500/90 area and then 1.2500, below which an acceleration in the following months would be quite likely, targeting 1.2000. Te selling pressure would diminish above 1.3500 (not very likely), with possible bounces back towards 1.3850-1.4000. Above this resistance (unlikely) the sentiment would turn positive. From a technical point of view, the euro remains in a fragile situation, especially versus the US dollar which has been providing stabilization signals against all main currencies. EurUsd’s main trend remains sideways and quite nervous but with a risk-asymmetry, at least as long as the euro area won’t solve the persistent peripheral sovereign debt’s crisis: if a strong directional movement is to be expected, chances are that such movement would consist in a strong fall of the euro, rather than a collapse of the US dollar.
FX
TREND
Trend 3-6 months Trend 6-12 months Trend 12-18 months
down down down
S1 S2 S3
SUPPORTS
1.2865-1.3000+ 1.2590-1.2625+ 1.2500++
SPOT PRICE 1.3177
R3 R2 R1
RESISTANCES 1.4250+
1.3850-1.4000++ 1.3500+
FX TRADER MAGAZINE April - June 2012 87
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