Euro/dollar was struggling before the holidays. The upcoming week, between Christmas and New Years Eve, is very light in terms of events and volume. Here is an outlook for the upcoming events, and an updated technical analysis for EUR/USD.
The ECB weighed in with its massive loans to the banks: more than 500 European banks took loans that reached around 489 billion euros. The optimism from this large operation was short-lived. Peripheral bonds cannot really calm down without direct buying from the ECB.
Updates: A successful bond auction in Italy was shrugged off by the pair that trades in a narrow range. See how to trade this pair with the US jobless claims. The situation significantly deteriorated. After an initial fall on end of year flows, and rumors, a bad Italian bond auction sends EUR/USD to a 15 month low.
- German CPI: Thursday. In the past four months, prices have hardly moved in Europe’s No. 1 economy. After no change whatsoever in the past two months, a rise of 0.8% is expected now. Note that the each German state publishes its CPI estimation at a different hour during the day.
- M3 Money Supply: Thursday, 9:00. After jumping to a pace of 3.1% two months ago, the growth of money in circulation eased once again to 2.6%. Another drop is expected for November, to 2.5%.
- Private Loans: Thursday, 9:00. More loans mean more economic activity. The pace of new loans has ticked up last month and reached 2.7%, after printing 2.5% beforehand. A rise to 2.8% is expected now.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar traded in a rather narrow range throughout the week. A break above 1.3145 wasn’t confirmed and the pair dropped, closing at 1.3046, almost unchanged from last week.
Technical lines from top to bottom:
An important high line is 1.3650, which served quite well during Q4, and was only temporarily breached. It is one of the more distinct lines in the range. Next we have yet another tough line: 1.3550 provided support early in September and then switched to resistance after the fall. It proved it can work as good resistance as well, as seen after the Non-Farm Payrolls.
1.3480 managed to stop an attempt to rise in December. It also had a bi-directional role in September. The 1.3420 line is weaker now but still significant. When this bottom border of the range was broken, it immediately switched to resistance.
The level of 1.3380 is the next line. It is a minor pivotal line now once again.. 1.3280 was the bottom in December and is important resistance. Another line of interest is 1.3212 which held the pair from falling and switched to resistance later on.
Very important resistance is at 1.3145 which wad the lowest point seen in the current round of the crisis and was only broken for a short time from the other side 1.3060 remains immediate resistance now. It also provided support back in December 2010 and had a pivotal role.
The round number of 1.30 is psychologically important and also worked as some support. After the breakdown, it was shattered. The new low of 1.2945 is a significant line as well. A break below this line will open the road to a new year-to-date low.
1.2873 is the YTD low set in January, and provides strong support. A break below this line will send s back to levels last seen in September 2010. 1.2734 worked as support in the summer of 2010 and is the next line below.
1.2640, is a weaker line of support, after working as such during the fall of 2010. The last line is 1.2587, the trough of August 2010.
A sharp and widening downtrend channel can be seen on the graph, and is stronger now after downtrend support provided support during the downfall. Downtrend resistance begins at the end of October and has been widened to accommodate to the changes. Downtrend support was formed later on but is more distinct – it wasn’t violated.
I remain neutral on EUR/USD
The large LTRO operation by the ECB prevented an immediate catastrophe for the European banks but didn’t solve the sovereign debt problem. This indirect QE will likely buy time during the holiday week. In the long run, it’s a lose lose situation for the euro.
If you have interest in a different way of trading currencies, check out the weekly binary options setups, including EUR/USD, GBP/JPY and more.
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For the Swiss Franc, see the USD/CHF forecast.
- USD/CAD (loonie), check out the Canadian dollar.