EUR/USD Failed to Break Out

Posted on January 5, 2010 by Yohay
Filed Under Forex News, Forex Opinions | 4 Comments

The Euro tested the upper border of its trading range and bounced. There are many reasons for explaining the move upwards, and one good reason for not seeing a break.

EUR/USD went as high as as 1.4480 – an important resistance line, and then fell back down to the low 1.44s. Since December 16th, the pair ranged between the support line of 1.42 to the resistance region of 1.4444.

As mentioned in the EUR/USD forecast, there isn’t a single point of resistance but rather a region: 1.4444 was the resistance line during the summer. After this pair broke his line, it stalled for a while, and the bottom border before continuing upwards was 1.4480.

After the fall on December 16th, this range effective resistance. EUR/USD traded below 1.4444, but today it stretched itself towards 1.4480 before bouncing back.

There were a few reasons for the Euro to rise:

  • The number of unemployed people in Germany fell again, surprising economists again. This improvement in the continent’s largest economy is a good sign.
  • CPI rose by 0.9%: Inflation is picking up in Europe, after suffering from a long period of deflation. Although this exact rise was predicted, it still supplies hope for a rate hike.
  • American Pending Home Sales fell by 16%! A fall was expected after 9 straight months of rises, but this big scale wasn’t predicted. Following the drop in the new home sales two weeks ago, there’s a growing notion that the economy is still very dependent on the stimulus actions by the government. When the aid is withdrawn, the economy is down again.

The only dollar positive news was a higher-than-expected growth in US factory orders. This cannot explain the fact that EUR/USD didn’t make a breakout.

The reason that I see for no breakout is the big event ahead: Non-Farm Payrolls. This event sets the tone for this week’s trading and for a few weeks ahead. So – the market awaits the NFP, which might finally show growth in jobs after two years. And during the tense days and hours before this release, a breakout isn’t likely.

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Comments

4 Responses to “EUR/USD Failed to Break Out”

  1. Xavi on January 6th, 2010 12:17 am

    NFP is FX Party!!

    I was short since the beginning of the week but market behavior is completely different than I expected.

    I hope NFP starts positive this year as it would be the start of a nice year for the dollar, otherwise I will see hungry bears.

  2. Yohay on January 6th, 2010 9:57 am

    It sure is a party Xavi. Currently the market’s behavior is quite choppy.

  3. EUR/USD Outlook – January 11-15 | Forex Crunch on January 10th, 2010 10:31 am

    [...] Consumer Price Index rose by an annualized rate of 0.5% in November and rose by 0.9% in December according to the initial print last week. This is expected to be confirmed this time. Core CPI is different: prices have been slowing down [...]

  4. EUR/USD Outlook – January 18-22 | Forex Crunch on January 17th, 2010 6:15 pm

    [...] start to the week, opening with a Sunday gap above the 1.4480 resistance line which it previously failed to break. It traded mostly above this line, peaking at 1.4579 before falling below the line, and closing at [...]

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