Monday, March 30, 2015

Euro is looking vulnerable | Only one supporting signal on the radar

At the start of the London session of trading yesterday (March 30th 2015) the EURUSD pair went down, in a resolute manner, through the 200 period EMA on the hourly chart. It oscillated for the rest of the day but could not get up again through this important resistance level. In fact the 200 period EMA now appears as resistance on a number of time frames, including the 4-hour and even the 10-minute charts.

The chatter on the wires all day was, once again, about the Greek situation. That country is facing a deadline of the end of April to come up with solid proposals for settling its fiscal issues, but there seems to be, at the very least, a certain amount of brinkmanship going on. This has led some commentators to speculate that the Hellenic Republic could, conceivably, find itself exiting the European Union by accident. None of this helps the Single Currency.

Technically, yesterday saw the formation of a bearish descending triangle, with the 200 EMA forcing price down for it to be supported, for now, at a level that is just above the psychologically important 1.08 level. That 200 EMA may not exactly be a brick wall, but the longer it remains as resistance it could well be a Becher’s Brook (a difficult, indeed infamous, fence in the Grand National horse race that is held annually at Aintree, England). A fall below 1.08 has the potential to open the floodgates.

Only one bright signal

There is only one sign on the horizon to support the Euro, and that is a contrarian one. The weekly Commitment of Traders figures published by the US Commodities Futures Trading Commission (CFTC) shows that non-institutional traders hold the largest volume of EURUSD short positions since 2012. This might seem like another indication that this pair is heading south, but many traders view such commitment by non-institutionals as an indication that  the security concerned, in this case EURUSD, is more likely actually to go in the opposite direction (institutional traders are not included in this type of analysis – presumable they are considered to know what they are doing).

Time will, as is usual, tell the tale.

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