The 1.33 price point for the eurodollar now appears to be a formidable barrier, following the three consecutive failures at this level with the most recent occurring on 2nd January this year. The two previous failures in December 2012 both posted isolated pivot highs, further re-inforcing this weakness and were a significant factor in the most recent sell off.
Since then the daily trend for the eurodollar has rolled and is sliding lower with the pair now testing the psychological 1.30 level where a temporary platform of support has been created. Indeed, on Friday last week the price action resulted in an isolated pivot low, just above this level which consequently helped the eurodollar recover some lost ground and return to test the 1.31 price region.
As traders now wait for tomorrow’s interest rate decision and statement from the ECB, the eurodollar is delicately poised and any further breach of the 1.30 level could see a test of the platform of support now in place in the 1.2945 area, immediately below. Any failure here could then see a deeper and more sustained move down towards the 1.27 price zone in due course.
This possible change in sentiment is also reflected in the heatmap which has transitioned from highly bullish (bright green) to potentially bearish (dark red), a view also confirmed by the daily volumes which have also moved from bullish to no demand (white).
Whilst the longer term trend on the daily chart still remains bullish (supported by buyers in this time frame), any change in sentiment on the daily chart is likely to ripple through and if we do see either volume or trend move to a transitional phase, then expect to see further weakness for the eurodollar in due course.
In summary, the key level is now in place at 1.3000 and this now defines the price action for any bullish move.
By Anna Coulling