Euro Technical Analysis

Wednesday, January 16, 2013, Marketing Communication Euro, Monthly Please click image above for larger version The monthly timescale naturally takes the long term view so the commentary in this section will only be updated as when market events dictate. So regular readers of this report will only need to read the monthly and weekly sections on a relatively infrequent basis. However we include all the information to give new readers the full picture. Last Updated, January 16th, 2013 The euro monthly chart above shows how the currency has had a relatively strong performance over the past decade despite the wider concerns in the past few years. Retracement levels can often prove useful in FX trading and the lines calculated from the 2000-2008 highs seem to have caught much of the price action, red lines. The sell-off in 2010 for example, and the moves lower last year, found support off the 1.2134 area, the 50% level. So for the longer term the outlook on euro looks strong while this 50% level holds. As a result any moves down to this area would be seen as attractive longer term entry levels. Breaks under this major long term support would open up moves down to the 61.8% retracement, and even start to suggest more serious full scale retracement back towards the 0.8233 lows. The last rally off the 50% level has been enough to lift the euro out of this natural retracement consolidation area, trading above 1.3055. This opens up an increasingly positive outlook for H1 2013, with moves up towards the 1.4 seen possible. However due to the bearish phase over the past 4 years we would see gains on any such longer term leg higher capped around the 1.4 areas.  Closes back under 1.3055 would be needed to negate this relatively optimistic long term outlook. Euro, Weekly Please click image above for larger version Moving down to the weekly timescale the outlook is also optimistic, as the price action has broken its medium term bearish trend, diagonal red line, and has moved up to its 50% retracement line calculated from the 2010 lows and 2011 highs. Over this period it also has set up a strong bullish trend, black line. Price action above this trend keeps a bullish outlook on euro, with 1.3734 the initial targets for this buying. Traders could use the price trend line break as a signal that this optimistic view had been negated, and also monitor the RSI trend line as confirmation. Euro, Daily Please click image above for larger version Drilling down to the daily chart we see this last leg higher in more detail. Drawing retracement levels on this near term move, red lines, we can see how the weakness in November was not significant enough to decisively break into the retracement range between the 38.2% and 61.8% levels. (1.2741-1.2471). Following this retracement support the euro rallied back to its September highs at 1.3169. This opens up the February 2011 highs at 1.348. So the currency has posted a very solid recovery from July, found support at the 'expected' retracement levels, and now gone on to post fresh higher highs. So clearly the near term momentum is positive. In the very short term view however, the outlook is a touch more cautious as the price action does look vulnerable to some profit taking. Due to the positive trend over recent months the risk/reward on shorting the graph here does not look favourable. We see traders interested in buying back into euro, and adding to existing long positions on any move to the bullish trend line, only breaks under this trend, red diagonal line, would negate this positive overall view, and would open up moves down to the 38.2% retracement level highlighted and the November 2012 lows. Leaving a positive overall outlook, on the long, medium and short term. With a near term hold stance, moving to a buy stance if any profit taking led weakness brings the euro back down to the bullish trend, red line.  Contact Us For Spread Bet Sales:- 0044 (0) 207 894 8800 For CFD Sales/Traders:- 0044 (0) 207 894 8883 Email:- Sales@cantorcapital.com Graphs Graph images are created on Bloomberg, and remain under copyright to Bloomberg. Depending on your email settings the images contained in this mail may not be downloaded correctly on the first viewing. To view a web version please click here, Web version Unsubscribing From Emails If you would like to be removed from all Cantor Capital Commentary mails then please click on the ‘Update Preferences’ link on the header, or the ‘Edit your subscription’ link on the footer and select the ‘Unsubscribe’ link at the bottom of this page that appears. This will remove your email from all Cantor Capital Commentary distribution lists. 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