The Euro Breaks Support. Will It Continue To Move Lower?

by Phil Moore November 11, 2013

Last week saw the Euro move lower on the back of both better US economic data and the unexpected 25 basis point European Central Bank rate cut.

This saw the European currency give up over 200 pips at one point before finally finding support and bouncing before last week’s close. Critically it has now broken through 1.3400 and the question remains as to whether this is part of a greater trend or a simple chart blip.

The Euros fall was of course the dollars gain. The rally in the Green back over the week was more general. Better than expected economic figures helped to buoy the currency against many of its peers. The DOW too pushed higher, finally breaking above 15700.

Looking ahead to this weeks news, the British Pound will be in focus with Wednesdays’ Bank of England inflation report due for release to the markets. Inflation in the UK could well jump which would add to the recent momentum that has built up for Sterling. Also watch the following day for monthly Retail Sales which could help to fuel GBP’s recent party.

On the other side of the pond markets will be heading the content of Bernanke’s speech on Wednesday. The Dollar could be bottoming out and this could prove to the turning point in its recent fortunes. Jobless claims data on Thursday provide the only other major news of the week which is on the quieter on the calendar.

Key New This Week

Forex

EUR/USD - The pair crashed through lower channel support but subsequently bounced strongly from just below 1.3300. In completing this move the pair completed the gap created on 13th September. Given the strength shown we favour a move higher, back above 1.3400 this week.
USD/JPY - Price continues to move within a narrowing triangle, with the strong possibility of a significant break occurring before the end of the year. Expect continued volatile movement into the year end and watch for a break of 99.40 (higher) or 96.50 (lower) to signal the next move.
USD/CHF - After the strong move seen at the end of last week, the odds are on the USDCHF pulling back. It sits at falling trend line resistance. Given that the EURUSD looks set for gains, this pair looks in a position to pull lower, back below 0.9200 over the coming sessions.
GBP/USD - Recent better than expected UK economic figures have pushed the pair back into the range that has defined action since the beginning of September. The range (approx 1.6260 high and 1.5870 low) should continue to contain the extremities of price action over the coming sessions.

Major Indices

DOW - Price action on the Dow remains bullish with the Index finally pushing through 15700 to end the week at 15761. 15700 now provides an initial level of support to a market that is likely to build on these gains as the week progresses.
NASDAQ - A move on 4000 was thwarted last week with a pullback to 3850 seen before the Index pushed back above the 3900 level. Given last week’s bounce from support we would expect a move higher this week and further testing of the 4000 level.
FTSE- Having moved lower over the week, the FTSE was still able to hold above the 6700 level by the close. Direction remains unclear with a break and close above 6800 or below 6600 needed to confirm the bigger direction.

Commodities

Oil – The huge and continued fall through $100 per barrel leaves the price of Crude with a good chance of a rally, if only from exhaustion from its slide. The $93-94 level looks a good point to go long this week to capture any short term relief rally from recent falls.
Gold – The metal has again pulled back towards the $1300 level with a brief intraday dip below this level last week. Support at $1294 and $1281 could well be tested again this week, though could present a point to go long when looking at the bigger picture.