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.