EURUSD Strength Still Merely Corrective
EUR/USD has risen to 1.1029 after hitting 1.1041, the highest level since early November.
For now, the euro to dollar exchange rate is seen at 1.0973 and trend momentum suggests the pair remains short-term bullish but two technical strategists confirm they prefer to target downside longer-term.
EUR/USD rose to 1.1029 yesterday after hitting 1.1041, the highest level since early November.
The market attributed the declines in the dollar to comments from ECB member Ewald Nowotny who said markets had overestimated what action the ECB would take at its 3 December policy meeting, adding that there were exaggerated expectations in relation to the actions taken by the ECB.
However, there is a debate to be had as to whether the strength we are seeing is fundamentally justified or merely an extension of the correction phase triggered last week.
Commerzbank’s technical analyst Karen Jones views this short term strength as corrective only.
The pair is still trading on remnants of last week’s ECB policy decision, with some support from a 0.3% expansion of the eurozone economy in the third quarter, and 0.4% increase for the wider European economy as quoted by Eurostat.
There is no significant top-tier data scheduled today for either currency, so the pair is expected to trade within limited intraday ranges until the Federal Open Market Committee’s (FOMC) policy meeting next week.
On Tuesday December 8, EUR/USD reached a daily high of 1.0899 and closed at 1.0874. At present the pair is converting at around 1.0918.
"EUR/USD is attempting to stabilise very near term circa 1.08. There is scope for a further advance very near term to the 1.1032 200 day ma and even the 1.1087/97 September low and 28th October high, however here we would expect to see the market falter," says Jones.
Key resistance remains the 1.1228/17 2014-2015 downtrend and 55 week ma and while capped here the market will remain in a longer term down move.
Commerzbank's recommendation is to sell rallies to 1.0980, add 1.1050, stops 1.1230, target 1.00.
EUR/USD Technical Structure Still Bearish
As Commerzbank has noted, the upward movement of the pair is corrective.
Thus, core fundamentals will limit any upside, especially as we head into next week when the FOMC is highly expected to begin its gradual rate increases and EU economic data once again becomes the main influence of the EUR.
Swissquote states, “EUR/USD has increased and a medium-term momentum reversal is pretty close. Hourly support lies at 1.0524 (03/12/2015 low).
“Hourly resistance can be found at 1.0981 (03/12/2015 high). Expected to target resistance at 1.0981.
“In the longer term, the technical structure favours a bearish bias as long as resistance holds.
“Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation.
“The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).”