Euro dollar continues to defy the euro bears!!

EUR/USD daily chart
EUR/USD daily chart

As regular readers will know, I along with many other market commentators was expecting last week to be a pivotal one, given the interest rate decisions in Europe, and the prospect of the start of tapering by the FED. What a damp squib this turned out to be! The most exciting event last week was the election in Australia. Regular readers will also be aware of my bullish stance on the euro, and yesterday’s price action confirmed my analysis, squeezing the poor old euro bears hard once again.

The question now is how far the current bullish tone is likely to extend for the pair, and much will depend on the stiff resistance the EUR/USD is now running into, and which is clearly defined on the volume at price histogram (as shown on the left hand side of the chart).

The resistance starts at the current trading level at 1.3270 and extends through to 1.34, and is a deep and well defined area. Whether the pair is able to break through will largely depend on the associated volume, and it goes without saying that any move beyond this region will require high or even ultra high levels of flow. Over the last few weeks these have been moderate and reflecting the summer trading season, but as markets re-engage we should expect to see volumes rise accordingly.

What seems likely is that the eurodollar may continue higher, but run out of steam at 1.34.

From a fundamental perspective, and as mentioned at the start, last week’s NFP numbers were expected to provide the trigger for the beginning of the FED’s much anticipated taper program. However, given the poor number reported and downward revision of earlier releases, this has thrown into doubt any immediate start of this program, and which would have been US dollar positive. The German election too on the 22nd September will also play its part, and whilst Angela Merkel is expected to regain power, and so maintain the status quo, what is also interesting is the increase in big league US investors such as pension funds buying $65bn of European stocks in the first six months of 2013.

By Anna Coulling

About Anna 1040 Articles

Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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