The EUR/USD continued to climb higher once again yesterday, recovering virtually all the losses from the sharp sell off last week, which saw the pair test the 1.2865 region, and ending the session with a wide spread up bar which tested but failed to hold the 1.3100 level. The move lower last week was clearly signaled on the daily chart with the arrival of an isolated pivot high in the 1.3128 price area, with consequent weakness for the euro as a result. Since then, the pair have recovered, and the bulls are now firmly back in charge as evidenced by the daily volume bars which have remained firmly green during the week, and supporting the daily trend, which also remains firmly bullish. The three day trend at the bottom of the chart also remains firmly positive for the pair, and with only minor selling over the last few days, yesterday saw the buyers return on this timeframe, to support the longer term positive sentiment for the Euro. The Heatmap also remains firmly bullish, and indeed we also received further confirmation with a volume entry signal in blue, confirming the earlier green trend entry signal of last week, adding further weight to this analysis.
From a technical perspective, the key level for this pair is now extremely well defined in the 1.3170 price area. We have already seen three failures at this level, with the isolated pivot high of September and last week, defining the resistance level. This is now increasingly significant, and if this level is breached, then we can expect to see the pair continue firmly higher, using the price congestion as a strong platform of support and a springboard for the next leg up in the current trend. Indeed if the pair do clear this level, then expect to see the EUR/USD test the 1.3500 level, last seen in February 2012, as we move into a new trading year in 2013.
By Anna Coulling