Few people believed in sharp increase of the European currency. A moderate balance between 1.4323-1.4344 during the Asian deals was overcame on the upside that allowed the Euro to show its power against the US dollar. By the end of the first part of the European session the pair had been trading near the highs of August 18, 2008 at 1.4474 and after another portion of fundamental data it fixed a new local minimum at 1.4534.
Worth noticing that EUR/USD had moved closely to the low of September 26, 2008, which turns out to be a strong resistance level at 1.4542. In the rest of the trading day the pair was staying within 1.4479-1.4522. The session closed at 1.4481. Totally, the American currency dropped by 149 points versus the Euro.
What was the reason for such a sharp strengthening of the single currency? Some suppose that it was due to a sharp gold price upturn, others still believe in the Eurozone economy recovery, and there are also those who rely on slowdown of the oil price falling.
Something about Eurozone. The German export rose by 2,3% the third sequent month, compared to the previous month, having reached the reading of 68,4 bln. Euro, while import, in its turn, did not see any changes and stood at 55,9 bln.Euro. The Germany trade balance, measuring the margin between the import and export goods and services, ticked up to 12.40 bln.Euro versus the last month indicator of 10.90 bln.Euro. The experts were looking for growth just to 11 bln.Euro. A slight reduction of the German industrial production came in at -0.9%, consensus 1.60% of advancement, did not put any influence on the general positive mood of major investors and the hope for further revival of the global economy.
Some positive was brought by the stock markets. In particular, the American and European stock indexes demonstrated a slight rally.
The consumer credit decline in the USA is continuing till now. It decreased to -21.60 bln.dollars against the last period indicator of -10.30 bln.dollars. The analysts were looking for a moderate upsurge to -3.0 bln.dollars.
The speech of the ECB Head, Weber concerning the inflation risks, crisis and stepwise outgo from the special stimulus package was considered by the market as a right thing, not interrupting the Euro «plans».
The technical analysis. As it was mentioned above, overcoming of some significant resistance levels caused such confident sunward movement of the 16-nation currency. The upside price channel, which took its rise on August 12, was overbeared and at present moment its upper bound appears to be a support level and, probably, it will impact the pair lowering efforts in a short term. Presently, the trading bounds are 1.4478-1.4535. Perhaps, today the trading can be started from the levels mentioned above with the stops higher or lower this range. The Bollinger bands are narrowing, affirming the pair\'s ingoing to the sideward trend.
The next support levels are 1.4478, 1.4410, 1.4323 (200-day exponential moving average)
The resistance levels are: 1.4534 (yesterday\'s high), 1.4542 (low of September 26, 2008) and then an outbreak to 46 big figure range (psychological level)
Today, I recommend to buy the pair at 1-hour timeframe closing above 1.4558 with the target – T/P 1.4630 and S/L 1.4519
Sell the pair at 1-hour timeframe closing below 1.4455 with the target – T/P 1.4370 and S/L 1.4499.
Best regards,
Analyst: M.A.Magdalinin
