Sunday, September 15, 2013

EUR/USD Forecast (September 16-20) - PART 2

EUR/USD Technical Analysis
EUR/USD began the week struggling with the 1.3175. It then climbed sharply and conquered the 1.3240 line. Attempts to rise met resistance at 1.3325, a new line on the chart. The pair ended the week just below 1.33.

Technical lines from top to bottom:

1.37 was the 2013 peak, and is still far. 1.3590 capped EUR/USD back in February and is minor resistance.

1.3520 was a swing high in February, before the pair tumbled down. 1.3450 is the new peak of August 2013 and serves as the next resistance line.

1.3415 was the peak back in June and serves as a strong line of resistance, also after the break. 1.3325 worked as a double top in early September and is now a key line to the upside.

It is followed by 1.3240, which capped the pair in April and also had a role in August. It worked as support in September. 1.3175 capped the pair during July 2013. The pair closed very close to this line, and it will be pivotal.

1.3100 is worked as temporary resistance in December 2012 and is becoming more important once again, after capping a recovery attempt in June and then in July and providing support in September.

It is followed by 1.3050, which proved be strong support in May 2013, defending the round number in more than one occasion, but it is less significant now.

The very round 1.30 line was a tough line of resistance. In addition to being a round number, it also served as strong support and recently worked as a pivot line.

Downtrend resistance

Since mid August, a line can be seen capping the pair. A break above this line could release some steam, while a failure might send the pair downwards.

Draghi is cautious on the European recovery and other officials warn that it might be temporary. These worries come for good reasons: German figures have been weaker and many countries still have a long way to go.With a third bailout for Greece now seeming inevitable and with higher uncertainty over the German elections, there are quite a few reasons to worry.

However, the wild card is the Federal Reserve: tapering of 10-15 billion is becoming priced into the markets, as the general picture is positive. This will not be a huge surprise, even if it is dollar positive. However, nobody knows when the next stage will be. The tone of the statement accompanying the decision remains a mystery. In general, the US economy has an advantage over the European one and this should be reflected in a lower EUR/USD, but perhaps this will happen after the tapering and after the German elections.

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