Forex: EUR/USD consolidates 11-month highs; Technicals point higher
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EUR/USD
FXstreet.com (San Francisco) - The Euro is trading in consolidation mode against the US Dollar with the pair keeping the 1.3450 level. It was a choppy Monday's session with the EURUSD trading in a 50 pips range between 1.3420 and 1.3475, now the pair is closing the day 1.3450, 0.12% below opening price action.
"Fundamental drivers continue to support US equities, translating into US dollar strength against major currencies," points FXstreet.com analyst Richard Lee. Earlier in the day, the better than expected US durable good orders fueled sentiment but later the poor data out of the US Pending Home Sales undermined the previous rally.
With the recent upside move, the EURUSD has run into resistance at 1.3500. "The round figure holds some formidably, given it prevented a similar break higher back in February last year and is likely to remain steadfast in light of this new bullish wave," adds Lee, who believes that any failure to break above the barrier would purport "a decline towards initial support via the 1.3154 figure."
As for the short term, the EURUSD will face the immediate support at 1.3425 9low Jan.28) followed by 1.3352 (MA10d) en route to 1.3349 (low Jan.25). On the flip side, a break above 1.3480 (high Jan.25) would open the door to 1.3487 (high 2012 Feb.24) en route 1.3491 (50% of 2011-12 decline).
EURUSD technicals favor a bullish continuation
After reaching an 11-month high of 1.3478 on Friday, the EURUSD entered a consolidation phase on Monday, and even though hourly chats show a neutral picture, longer term indicators remain bullish. A break above the 1.3480/85 zone (Jan 25/2012 highs) would open the doors for a continuation toward the major 1.3500 level, while only below 1.3390, the bearish pressure could increase, delaying bulls and extending the corrective/consolidative phase.
UBS has revised its 1-month target to 1.3700. "Our one month target of 1.33 has been overshot and now we expect EURUSD to spike as high as 1.37 over the next few weeks," states the UBS analyst team. However, the UBS team maintains its three month target of 1.30 and longer term end year forecast of 1.20.
UBS joins in this way the Goldman Sachs dramatic revision from 1.25 on 3 and 6 months target to 1.4000 flat over the coming months.
TD Securities is bullish too. "Overall, we remain bullish near term on EURUSD, and the EUR crosses still look like better buys to us as well", says the TD Securities team. "That suggests to us this modest consolidation is a buying opportunity. 1.3400 should provide solid support".
Rabobank agrees on the bullish idea and after assessing the last CFTC COT report, analyst Jane Foley at commented, "Net EUR longs pushed higher to stand at their strongest position since July 2011. The continued improvement in the spot market suggests the EUR has the potential to rise further this week". Regarding the greenback, Rabobank's expert added, "Net USD longs edged a little higher but in recent weeks positions have been consolidating at fairly low levels".
The Tuesday ahead
Moving forward to Tuesday, the euro docket will kick in with a gauge of the German consumer confidence by the Gfk Survey, followed by Import Prices, ahead of French Consumer Confidence and Spanish Retail Sales.
Across the Atlantic, the S&P/CS Home Price Index and January's US Consumer Confidence are also due. Others events to pay attention in the coming days are:
- Fed Interest Rate Decision (Jan 30 19:15 GMT)
- US Nonfarm Payrolls (Feb 01 13:30 GMT)
- US Gross Domestic Product Annualized (Jan 30 13:30 GMT )
- German Consumer Price Index (Jan 31 13:00 GMT)
On the Fed side, and given that baseline economic fundamentals remain well supported, "speculation is growing that Fed policymakers may hint at an early exit from recently implemented monetary stimulus as the notion of a rebound continues to surface," points Richard Lee. "And, any innuendos of a retraction of stimulus would be particularly bullish for bond yields, which could translate into US dollar strength in the medium term."
"Fundamental drivers continue to support US equities, translating into US dollar strength against major currencies," points FXstreet.com analyst Richard Lee. Earlier in the day, the better than expected US durable good orders fueled sentiment but later the poor data out of the US Pending Home Sales undermined the previous rally.
With the recent upside move, the EURUSD has run into resistance at 1.3500. "The round figure holds some formidably, given it prevented a similar break higher back in February last year and is likely to remain steadfast in light of this new bullish wave," adds Lee, who believes that any failure to break above the barrier would purport "a decline towards initial support via the 1.3154 figure."
As for the short term, the EURUSD will face the immediate support at 1.3425 9low Jan.28) followed by 1.3352 (MA10d) en route to 1.3349 (low Jan.25). On the flip side, a break above 1.3480 (high Jan.25) would open the door to 1.3487 (high 2012 Feb.24) en route 1.3491 (50% of 2011-12 decline).
EURUSD technicals favor a bullish continuation
After reaching an 11-month high of 1.3478 on Friday, the EURUSD entered a consolidation phase on Monday, and even though hourly chats show a neutral picture, longer term indicators remain bullish. A break above the 1.3480/85 zone (Jan 25/2012 highs) would open the doors for a continuation toward the major 1.3500 level, while only below 1.3390, the bearish pressure could increase, delaying bulls and extending the corrective/consolidative phase.
UBS has revised its 1-month target to 1.3700. "Our one month target of 1.33 has been overshot and now we expect EURUSD to spike as high as 1.37 over the next few weeks," states the UBS analyst team. However, the UBS team maintains its three month target of 1.30 and longer term end year forecast of 1.20.
UBS joins in this way the Goldman Sachs dramatic revision from 1.25 on 3 and 6 months target to 1.4000 flat over the coming months.
TD Securities is bullish too. "Overall, we remain bullish near term on EURUSD, and the EUR crosses still look like better buys to us as well", says the TD Securities team. "That suggests to us this modest consolidation is a buying opportunity. 1.3400 should provide solid support".
Rabobank agrees on the bullish idea and after assessing the last CFTC COT report, analyst Jane Foley at commented, "Net EUR longs pushed higher to stand at their strongest position since July 2011. The continued improvement in the spot market suggests the EUR has the potential to rise further this week". Regarding the greenback, Rabobank's expert added, "Net USD longs edged a little higher but in recent weeks positions have been consolidating at fairly low levels".
The Tuesday ahead
Moving forward to Tuesday, the euro docket will kick in with a gauge of the German consumer confidence by the Gfk Survey, followed by Import Prices, ahead of French Consumer Confidence and Spanish Retail Sales.
Across the Atlantic, the S&P/CS Home Price Index and January's US Consumer Confidence are also due. Others events to pay attention in the coming days are:
- Fed Interest Rate Decision (Jan 30 19:15 GMT)
- US Nonfarm Payrolls (Feb 01 13:30 GMT)
- US Gross Domestic Product Annualized (Jan 30 13:30 GMT )
- German Consumer Price Index (Jan 31 13:00 GMT)
On the Fed side, and given that baseline economic fundamentals remain well supported, "speculation is growing that Fed policymakers may hint at an early exit from recently implemented monetary stimulus as the notion of a rebound continues to surface," points Richard Lee. "And, any innuendos of a retraction of stimulus would be particularly bullish for bond yields, which could translate into US dollar strength in the medium term."
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