EURUSD Breaking The Channel

  • EURUSD Spot has broken below the  50-day moving average
  • Market may see short-term Euro buying, this will not last
  • Neither the U.S. nor Eurozone economy are in rude health
  • No ECB support for the Euro as the region slipped into deflation during August

EURUSD Spot ventured below the 50-day moving average (50dma) on September 22 as shown by the activity within the golden circle in Figure 1.


Figure1: EURUSD 12-Month Chart  and Past Weeks Spot, 50dma and 200dma                                                                                                                   Source:  , Spotlight Ideas

For that reason, it is not unreasonable to regard the price activity of the past week a representing a trend reversal. It is more than merely observing that the Dollar was just enjoying its best week since early April.

Neither the U.S. nor the Eurozone can claim to have a robust economy. Indeed, the data that was released was weaker than had been expected.

Germany published the September Business Climate survey which improved to 93.4, below the expected 93.8.

The U.S. released Initial Jobless Claims for the week ended September 18, which came in at 870,000 worse than the 843,000 expected and the previous 866,000. Continuing Jobless Claims for the week ended September 11 increased to 12.58 Million.

Looking Ahead

The EURUSD pair has posted a lower low and a lower high daily basis. This would imply that the bears are currently hold the whip hand.  

That said, the technical indicators across the MACD and Stochastic measures suggest that early Monday trade will see Euro buying. So, I would be a willing buying of early Euro momentum whilst treating it like a hot potato that I will drop once it seems over cooked.

Thus, I am just a short-term buyer as Spot does not seem primed to break above the 50dma and so after the first flurry of buying I see the Euro easing back.

Of course, the looming U.S. Presidential election will cast a shadow on the Dollar, but I cannot see ECB President, Christine Lagarde talking the Euro up on Monday or Wednesday. That region really needs a weaker currency to lift the economy and its inflation rate that was -0.2% YoY in August.

The focus will, of course, be at the end of the week when U.S. September Non-Farm Payrolls should be between 830,000 to 860,000 and the unemployment rate will decline to 8.2%.

Watch for:     Support levels: 1.1620 1.1580 1.1530      Resistance levels: 1.1685 1.1725 1.1760 

Macroeconomic Strategist

Stephen Pope is the Managing Partner of Spotlight Group. He has worked in the world of finance since 1982 and has performed d... Continued

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