On Monday, the European currency has demonstrated the strongest percent growth against the US dollar since the middle of June 2010.
Investors preferred more profitable currencies after the positive economic news released on weekend.
The major support for the euro were the Chinese data which exceeded the expectations, setting higher forecast on economic growth in the Eurozone and the agreement on international banking rules.
From the first minutes of the Asian deals the pair went up sharply. A slight correction was seen in the middle of trading day. However, thereafter investor risk appetite increased again, which led to another turn of the uprising movement of the euro. By the end of the day, slight profit fixation was observed.
The trades closed with the euro advantage, which strengthened versus the US dollar by 162 points, the trading volatility totaled 185 points.
Fundamental review:
The French current account deficit shrank to EUR 2.2 bln in July against EUR 2.7 bln in June. According to the Bank of France, surplus in service trade edged up to EUR 1.9 bln in July after EUR 1.3 bln in the previous month. Surplus of income account rose to EUR 2.5 bln versus EUR 2.3 bln. Trade deficit in trading of goods increased to EUR 4.4 bln against EUR 4.1 bln.
The European commission Monday’s decision to revise higher the forecast on both the EU and the Eurozone GDP for 2010 supported the euro. It said that strong growth in export of industrial goods is favorable faster-than-expected recovery after economic crisis.
According to the revised forecast, the EU GDP is most likely to grow 1.8% in 2010 versus the May estimates of 0.9%. The Eurozone GDP is forecast to surge 1.7% in 2010 after the May estimates of 0.9%.
Concerning the USA, it should be noted that the US budget deficit turned out to be less considerable in August than in the same period of the prior year, but it was still growing. The US budget deficit was $90.53 bln in August compared to $103.56 bln deficit in the preceding year. In the past period of the fiscal year the US budget deficit amounted to $1.260 trn.
Technical analysis:
Trading totally went into upward tendency phase. It is held in price channel created from September 10. The lower limit of this channel goes through 1.2677 area with the upper limit placed nearly the high of 1.2749 from September 10 and the yesterday’s high of 1.2889.
The first resistance level managed to keep the pair from growth yesterday. Today, it is the area of 1.2890, from which the advance can last to 1.2914 and 1.2951.
In case of correctional decline, the first key support level is 1.2856, from which the drop can continue to 1.2830 and 1.2803.
Let us have a look at middle-term outlook of the pair advance. The 50 day exponential moving average broke out the 200 day moving average from bottom to top during the yesterday’s deals. This fact signals about the clear aim of the euro to go up against the greenback. However, to start a real upward trend and cancel the sideways motion, which has been in the range of 1.2625 – 1.2920 since August 18, the pair needs to fixate above the 29th pattern.
Bollinger bands are up-directed and on today’s Asian session they are showing the volatility reduction on the market. The trading is driven in the upper zone of the channel and the mid band positioned in the area of 1.2860 is dynamic support.
MACD is in the purchase area and any correctional fall of the pair can cause a new growth wave of the pair in short-term outlook.
Today’s recommendations:
Support levels: 1.2856, 1.2830, 1.2803.
Resistance levels: 1.2890, 1.2914, 1.2951.
Today it is advisable to buy the pair at a 1-hour timeframe closing above the level of 1.2893 with a target - T/P 1.2966 and S/L 1.2862.
It is possible to sell at the closing of a 1-hour timeframe below 1.2847 with a target – T/P 1.2793 and S/L 1.2870.
