Let’s zoom closer over the 3-hour time frame of the fiber (EURUSD). Notice that the pair was able to rally after dipping to a low of 1.2154 earlier today. Since then, it has traded strong and has even reached a high of 1.23426. Thanks to the previous support around the 1.2150 area and the oversold condition at that time, the pair was able to avoid another slide. At present, the euro could still move higher against the greenback since the stochastics are from the overbought region. It, however, could bump into some resistance at 1.2435 and at the previous 1.2222 low. The next significant level that it could reach in the event that the pair breaches the two mentioned marks is 1.2600. On the other hand, the fiber could just move sideways before declining once more. In case it does, 1.2150 should give it enough lift in the mean time.
Apparently, today’s euro rally was due to China’s hawkish position on the country’s European investments. In a statement made earlier today, Chinese officials said that the rumors that the country is currently evaluating its holdings in Europe are ‘baseless.’ China holds a significant amount of European assets in reserves. Due to the debt crisis in the euro zone, some people are led to suggest that the world’s second biggest economy is considering to liquidate some of their positions. Today’s statement, though, hints that the country will not sell EURs at least in the near term. In the occasion that China sells a big percentage of their position, it would signify a big loss of confidence in the currency which would consequently devaluate it further. Of course, the country does not want the euro to decline some more because such would also decrease the valuations of their assets.
Today, the US’s first quarter GDP growth is expected to be revised upward from 3.2% to 3.5%. The better than projected retail sales figures during the first 3 months of the year proposes the likelihood of an upgrade in expansion. Note that about 70% of the US’s total output is from domestic consumption which is commonly gauged by the retail sales account. If the preliminary GDP comes in at least as expected, investors could find another reason take some more risk by buying up the anti-dollar currencies like the EUR. A weaker number, on the other hand, could cause the euro and the other non-dollar currencies to weaken.
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It is base-real stock exchange.
Market is a center of every thing.
Globally it is going on.
Like a film speed.
So difficult for catching it.
What is behind the phenomena?
Sometimes in real and unreal.
It is like a creature that needs alive for living. Inside it can blow something. Tall road is opened in forward movement. The obstacles are like air on the sky.
Great post and very detailed. I do not follow the euro as closely as I may the US or Canadian dollar. Thanks for the insight.
Rob
Thanks Rob! Well, the euro actually has been the center of attention for the past couple of months given the ongoing debt crisis in the euro zone. In my opinion, the EUR would still experience some great deal of volatility in the coming days or weeks until the whole Greek fiscal problem gets solved. Technically, in my view, the currency could still head lower since its downtrend is still intact.
Above is an update of the EURAUD chart analysis that I presented last May 20, 2010. As you can see, the pair punched through its downtrend line and all the way up until it encountered some resistance at the psychological 1.5400 handle. Notice that 1.5400 was previously a support and as soon as it touched the mentioned mark, it then turned around and fell again. At present, it is hovering just above the downtrend line. Now, this former price fence could switch its role into a support that would give the pair some lift. If it does, it could force the pair to at least move sideways or to even rally again. On the other hand, if the said net does not hold, it could fall straight back down to the 1.3900 territory again. But since there is no apparent sign of reversal yet, I’d say that the pair still has a higher chance of trekking south.