Tuesday, June 25, 2013

Serious support for EURUSD at 1.30. Possible ECB intervention

An interesting and unusual confluence of technical indicators has occurred in the EURUSD pair. The 200 period Simple Moving Average (SMA) on the daily chart now corresponds very closely with the 200 period SMA on the four hour chart (see above – the red line is the 200 SMA in each chart window).

If the 200 period SMA is a strong technical indicator at the best of times, a correspondence such as is seen here makes it a cast iron one. An additional factor is the location of this confluence – right about the 1.30 rate level. As regular readers will know, support at significant round numbers is support that needs to be taken seriously.

What does all this mean? It means that someone, or something, is ensuring that when the EURUSD rate approaches the 1.30 level interventions are made in the market to make sure it falls no further. Who this entity is not really important, although a primary suspect would have to be the European Central Bank (ECB). That institution might even be joined in its endeavours by its counterpart on the other side of the Atlantic, the US Federal Reserve. Stranger things have happened in the past.

As with all other times when support is apparent, if it fails the fall afterwards will be significant. And the stronger the support, the more aggressive the fall when and if it does break through.

One way or another, make sure you respect the strength of this support level when planning your Forex trades. At Omicron Forex, we most certainly will.

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