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16 May 2013
Euro posed for further downside
FXstreet.com (Barcelona) - The shared currency has maintained a negative bias so far, trading well below the 1.29 handle and with the 1.30 limestone far away in the rear window.
In addition, with the euro zone contracting for its sixth consecutive quarter - and of course leaving the door open for another negative print in the Q2 GDP – plus the disinflation picking up pace amongst bloc members, it seems more and more plausible that those peaks in EUR/USD back in February will be remembered as the best moments of the cross in the present year.
… It’s all about the Fed
Against the backdrop of the ongoing USD rally - intensified after the USD/JPY break of the psychological triple-digit barrier - rumours have been picking up pace in the global markets about the timing of either the Fed exiting the current quantitative easing programme, or scaling back its monthly purchases of MBS, currently at $85 billion. The strength seen in the greenback, reflected in the US Dollar Index posting yearly highs above 84.00 the figure, is not allowing any extra room for other thoughts than the Fed anticipating its first rate hike. Furthermore, the recent multi-year lows in the Initial Claims plus Payrolls expanding at a pace higher than the “line in the sand” at 200K give extra impulse to the buck and open the gate for the euro to test new lows.
Technically speaking, the cross broke the 2-month uptrend set from April lows and is now meandering around the area of 1.2850/70, where converge December 2012 lows and the 50% Fibonacci retracement of the July’12 – February’13 upside.
Further downside pressure would initially target October 2012 lows around 1.2840 ahead of 2013 lows in the proximity of 1.2740. Should the selling wave extend, then November ‘12 lows at 1.2660/70 would come to play.
On the upside however, the first barrier north emerges at the base of the cloud in the vicinity of 1.2930 ahead of the key 200-day moving average around 1.30.
In addition, with the euro zone contracting for its sixth consecutive quarter - and of course leaving the door open for another negative print in the Q2 GDP – plus the disinflation picking up pace amongst bloc members, it seems more and more plausible that those peaks in EUR/USD back in February will be remembered as the best moments of the cross in the present year.
… It’s all about the Fed
Against the backdrop of the ongoing USD rally - intensified after the USD/JPY break of the psychological triple-digit barrier - rumours have been picking up pace in the global markets about the timing of either the Fed exiting the current quantitative easing programme, or scaling back its monthly purchases of MBS, currently at $85 billion. The strength seen in the greenback, reflected in the US Dollar Index posting yearly highs above 84.00 the figure, is not allowing any extra room for other thoughts than the Fed anticipating its first rate hike. Furthermore, the recent multi-year lows in the Initial Claims plus Payrolls expanding at a pace higher than the “line in the sand” at 200K give extra impulse to the buck and open the gate for the euro to test new lows.
Technically speaking, the cross broke the 2-month uptrend set from April lows and is now meandering around the area of 1.2850/70, where converge December 2012 lows and the 50% Fibonacci retracement of the July’12 – February’13 upside.
Further downside pressure would initially target October 2012 lows around 1.2840 ahead of 2013 lows in the proximity of 1.2740. Should the selling wave extend, then November ‘12 lows at 1.2660/70 would come to play.
On the upside however, the first barrier north emerges at the base of the cloud in the vicinity of 1.2930 ahead of the key 200-day moving average around 1.30.