Sunday, September 22, 2013

EUR/USD Forecast (September 23-27) - PART 2

EUR/USD Technical Analysis
Euro/dollar started the week with a gap above the 1.3325 line. This line quickly switched to support. After the big surprise, the pair shot higher and reached 1.3570 before stabilizing in range above 1.35.

Technical lines from top to bottom:
We start from much higher ground this week. 1.3940 was a peak in September 2011, two years ago, and is just before the round number of 1.40. 1.3870 capped the pair during the fall of 2011 and served as the “shoulders” in a H&S pattern. 1.38 is a round number and also worked as a temporary cap during that period of time.
1.3710 was the 2013 peak, and is getting closer. The line is the next big target.1.3650 temporarily capped the pair during that period of time.
1.3570 is the swing high of September 2013 and is the initial line of resistance now. 1.35 is a nice round number that also served as support after the big No-taper surge.
1.3450 was a peak during August 2013 and serves as minor support. 1.3415 was the peak back in June and works as another line of support.
1.3325 worked as a double top in early September and it was crossed only with a Sunday gap. It remains a clear separator of ranges. 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. 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.

Broken uptrend resistance
The line accompanying the pair since early June was broken by the big surprise. This can serve as a bullish sign.
The dust is now settling from the big NO Taper surprise that knocked down the dollar. However, fresh comments show it was a close call and that an “Octaper” could be on its way. The reaction in the euro was somewhat strong.
In the euro-zone, the recovery is green and fragile. A stronger euro can hurt this recovery. More importantly, the German elections pose a risk: unless the current CDU/CSU/FDP coalition wins a majority like now, Germany will enter a period of uncertainty regarding the new government. Eventually, the leading scenario is for a grand center-right / center-left coalition led by Merkel. This grand colation could be more pro-European, but not necessarily pro higher euro and not necessarily stable. We could see the pair retrace now.
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  4. So, EUR/USD may move higher this week while it may also possibly move downward, too. While there's a good chance it will go lower, the same chance exists it will go higher. -I think this forecast is bullish, but really doesn't do much more than a coin toss.