EUR/USD: Sell the EURUSD on Upticks Says Strategist

The euro exchange rate has strengthened against both sterling and the US dollar - but one analyst confirms any bounces merely provide another selling opportunity.

EURUSD has bounced off the 1.08 support region and now looks intent on retaking 1.10.

However, advancing beyond this point will likely be tough and we would suggest this level will provide the first zone of resistance to the present rally.

Beyond here the next hurdle is 1.12.

The euro to dollar exchange rate (EURUSD) recovery comes following the declines suffered in the face of a rejuvenated US dollar over the course of the previous week.

Indeed, the euro was the worst performing major currency of the week suffering a 3% fall in value.

Those looking for even further declines in the EURUSD may have to be patient however.

There is a lack of Greek-inspired fuss to be had at the present time which will allow the euro exchange rate complex to settle.

1.08 is seen as the technical support level that would have to be broken ahead of further declines.

“I don’t expect another 3% decline in EURUSD in the week ahead (nor another 3.5% decline in EURGBP), but I still think the best position in EUR is short. I still look for EURUSD to be trading somewhere around 1.04 when the Fed hikes,” says a forecast note from analyst Greg Anderson at BMO Capital.

Charts only suggest minor resistance at 1.0819 between Friday’s close of 1.0830 and 1.0500. “As noted previously, positioning is not a factor that should impede further downside,” says Anderson.

Sell on Upticks

In a longer term perspective, EUR/USD still trades in the 1.08/1.1467 consolidation range.

"The global picture remains USD constructive (EUR/USD negative), but some consolidation after the recent EUR/USD decline might be on the cards. We maintain a sell on upticks approach for return action lower in this range. EUR/USD 1.1224/78 is a first point of reference," says Piet Lammens, currency strategist with KBC Bank.

Longer-Term: Favouring a Fall to Parity

Those parity-watchers will need to be patient –  a 1:1 exchange rate is still firmly on the cards in the near-future.

Lucy Lillicrap, who manages the risk desk at brokerage AFEX, has taken a look at the key levels determining the outlook for the euro dollar exchange rate:

“Attempts to reverse fresh Euro selling pressure are proving unsuccessful with the most recent rally stalling ahead of 1.1250. Prior advances failed to hurdle key (long term) resistance at 1.1535 and until a break of this higher level can be engineered prior 1.0465 cyclical lows will remain vulnerable to attack.

“Broader studies imply risk for an extension nearer 1.0000 and whilst regular reaction bounces cannot be ruled out beforehand a long term reversal appears unlikely at this juncture.

“Instead technical studies argue support is somewhat thin until back toward 1.0615/25 initially while fresh rebounds face nearby resistance at 1.0950/60 and without any obvious re-basing work rally potential looks limited even beyond here for now.”

EURGBP is also holding, for now, support in the .6940/30 zone, so while the trends remain intact we may just see markets range trade for the day ahead.

Resistance in EURUSD lies at 1.09/20-40 and in EURGBP at .6990-.7025 today. GBPUSD is expected to remain trapped in a range around 1.56/1.55 for now.