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EUR / USD Trading Outlook

Friday 9th December

EUR/USD came to a 1.3280 low early this morning with EU leaders having little positive impact on the markets. However, it seems, Germany’s trade balance and CPI data has lifted the euro as it advanced against the pound and the US dollar. It currently tests the challenging resistance 1.3370 and as long as this holds there is a preference to sell with the initial support at 1.3308 followed by 1.3285.

Thursday 8th December

EUR/USD tested 1.3425 resistance in the US session and overnight, unable to break the level to the topside it has slide down to 1.3390 where some support is noted. The market awaits the ECB rate decision due at 12:45 GMT today followed by President Mario Draghi’s press conference 45 minutes later and the results of the EU leaders summit.  The pair could stay in the 1.3390-1.3425 zone until these announcements. It is widely thought that the ECB will cut rates from 1.25% to 1.00% today.

Investors are still left waiting for news from the EU leaders and whilst the EU summit may not cause a market rally any news that the ECB are willing to step in and help with a run of quantitative easing will have an impact. Before the ECB agree to such action, they must be satisfied with the fiscal compact set-out in the EU summit. A risk-on rally may come which will wipe out shorts in the market however it is likely to follow the pattern we are getting use to and will not last for long and any further bad signs could easily bring risk aversion back – the yo-yo effect. The market is sensitive and will stay this way until good results emerge and continue for some time.

From a technical stance EUR/USD is capped by a negative trend line and the RSI lacks momentum (30 min chart). There is a preference to sell below 1.3450 with the initial support at 1.3350 followed by 1.3305.

Wednesday 7th December

EUR/USD was given life overnight and advanced to the weeks high at 1.3450 as Asia investors became optimistic that the EU leaders plan will work. However, traders in the UK session have taken a different view pushing the pair back down to 1.3370. The news is mixed, on the one hand we have poor production data from the UK and Italy and UBS have made the forecast that the ECB will cut rates early tomorrow, by 25bp taking it to 1.00% and they expect further cuts in 2012. On the other hand Germany tested the market with a bond sell today which was taken well with good demand and EU leaders are working on a larger rescue package ahead of Friday’s summit which includes two bailout funds, the EFSF (European Financial Stability Fund) and the ESM (European Stability Mechanism).

From a technical stance the downside prevail and there is a preference to sell below 1.3450, as long as the level holds, with the initial support at 1.3357 followed by 1.3305. The RSI has struck against a major resistance around 70% and is reversing down.

Tuesday 6th December

EUR/USD came to 1.3335 lows this morning as traders in the UK open took it lower on the news from the S&P however the EU GDP figure has given the euro a lifeline and the pair has been lifted to 1.3400. The current market focus is how the ECB will be integrated into the Franco-German plans; with euro bonds off the table for now there is an onus on the ECB to print money to make huge loans or bond purchases. With pressure still on the euro there is a preference to sell the pair below 1.3445 with the initial support at 1.3305.

Monday 5th December

EUR/USD moves earlier today were stunted around 1.3450 as Eurozone PMI figures came in lower than 50 and retail sales at -0.4% giving the euro little reason to advance further against it’s counterparts. However, the news this afternoon has attracted buyers and pulled the pair higher to test 1.3485. There is a preference to buy the pair above 1.3415 with the initial resistance at 1.3520 followed by 1.3545.

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