The Single Currency (EURUSD) has been
enjoying resurgence in recent trading sessions. As can be seen above, it traced
out a double bottom in March and April, indicating a trend change, which has since
been followed through on. Just prior to that all the talk had been of the Euro
heading for parity with the US dollar, and indeed on the daily chart the fall
in early march does look like a precipitate one.
This change of fortune for the
Eurozone currency would seem to be on the back of more recent less-than-stellar
US economic indicators. But the performance of the pair since mid-April is
still impressive, given that Greece has not gone away, although it has been our
contention in the most recent bout of Greek tragedy that it is something of a
side-show, as that member state seems to have been effectively insulated with
regard to the possibility of causing contagion for the rest of the EZ. It has,
of course, the potential still to bring about short-term disruption.
Fundamentals
and technical favour a change
But now both technical and
fundamental considerations are beginning to weigh. As can be seen, the daily
chart is approaching an area of solid resistance, indicated as being in the
zone between 1.14 and 1.15. It is in the nature of support and resistance that
it does not reside at a precise price or exchange rate, but rather in a zone,
such as the one mentioned. The 200 Day Exponential Moving Average (EMA) is also
hoving into view, and this will provide much food for thought for the many
market participants who take notice of it.
On the fundamental side, Eurozone
Quantitative Easing (QE) is still in place and is scheduled to last until at
least the middle of 2016. The Federal Reserve in the US is still committed to
raising core rates over there. The members regard any soft economic numbers as
a transitory phenomenon, and they are probably correct. Therefore the
divergence of monetary policy between the US and the Eurozone is alive and
well. When the chips are down this will be the determinant of the exchange
rate.
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