Euro falls across the board, here’s why
Key Levels, Technical Indicators & Carry Trade
EUR/JPY
Euro bulls remained confined to a narrow trading
range, as it kept the cross bound to the 136.00 handle. As the price action
resumes and Japanese yen longs finally make a move, a break below the triangle’s
lower boundary will most likely see the euro bulls tumble toward 134.44, a level
marked by the 38.2 Fib of the 140.51-130.68 JPY rally. A further collapse of the
single currency defenses will most likely see the EUR/JPY head straight for the
133.00 figure, marked by the 23.6 Fib of the 140.51-130.68 JPY rally thus
breaking the 133.53, an August 22 daily spike low. A sustained momentum on the
part of the Japanese yen longs will most likely see the euro bulls continue to
retreat toward the psychologically important 130.00 handle. Indicators are mixed
with momentum indicator treading above zero line, while MACD is sloping upward
toward the zero line. Oscillators continue to tread in a neutral territory thus
giving either side enough room to maneuver, while volatility fell as range began
to shrink.
EUR/CHF
Euro longs retreated as the price action switched
sides in favor of the Swiss Franc bulls, which did not waste anytime in pushing
the cross toward the psychologically important 1.5500 handle. As euro longs
retreat under onslaught launched by the Swissie longs, with a move towards the
1.5500 figure, encountering euro defenses around 1.5524, a 23.6 Fib of the
1.5079-1.5661 EUR rally, with a break below the 1.5500 handle seeing the cross
testing the euro bids around 1.5482, a level marked by the 200-day SMA.
Indicators remain in favor of the euro bulls with both MACD and momentum
indicator above zero line. Stochastic remains extremely overbought, giving Swiss
Franc longs a chance to retaliate, however most of the prolonged moves to the
upside happened after the oscillators became overbought.
EUR/GBP
British pound bulls managed to take control of
the cross and did not hesitate to push the cross back toward the .6800 figure, a
level marked by the 38.2 Fib of the .7106-.6609 GBP rally. As cable longs
continue to scatter euro bids, a further move to the downside will most likely
see the pound longs test euros defenses around.6768, a 20-day SMA, which
currently acts as a first line of defense before sterling bulls can attack the
.6726, a 23.6 Fib of the .7106-.6609 GBP rally. Indicators are diverging with
momentum indicator above the zero line while MACD is sloping to the upside below
the zero line, with overbought Stochastic adding validity to the pound led
advance.
Sam Shenker
Sam Shenker is a Technical Currency Analyst for Forex
Capital Markets (FXCM). Sam is the author of the Daily and Weekly Technical
Research reports at FXCM. His reports include: Daily Technicals, Weekly Crosses
and the Weekly Chart Pack. Prior to joining FXCM, Sam spent a number of years on
Wall St trading equities, equity derivatives and futures. He also specialized in
research and analysis of high yield bonds, corporate bankruptcies,
restructurings, reorganizations and venture capital.