Medium term
Trade view / 10 August 2016 at 13:14 GMT

EURUSD...a puzzling technical aspect

Managing Partner / Spotlight Group
United Kingdom

My regular followers will know that I am not a fan of the euro. Indeed, I am running two short positions at this current time.

This trading note has been prepared to meet the request of a longstanding “follower”.
My misgivings about the euro are based on many deep rooted reasons which we do not need to go into here. I was, however, puzzling over why it is that the technical aspect of attitude toward the euro is so positive.

The time based technicals observations from one minute to one day all call the EURUSD as a “Strong Buy”. Weekly reads “Neutral” with only the monthly measure marked as “Sell”.
Source: Spotlight Ideas

The chart above is based on a one-year aspect and one can see that at the current level of 1.1187 (1342 GMT), spot is trying to press past and area that was an active zone in Q4 2015. 

Perhaps the shortest time technicals believe the spot level will spend most of next week clinging to the upper quarter of the current corrective. So the short term may see the euro hold its ground, but I cannot say I see much upside.

I accept that the Eurozone economy has dealt with Brexit in a better manner than might have been feared as the composite Purchasing Managers Index, rose to 53.2 in July from 53.1 in June.

However, I am looking out further and see Spain still without a government unless talks today between Spain's acting Prime Minister Mariano Rajoy the small, business-friendly Ciudadanos party bear fruit.

Italy is to vote on constitutional reform in October and the tenure of the Prime Minister is far from certain. Next year there will be elections in France and Germany and all the while the Eurozone economy is hardly moving ahead and so euro will not receive any support from the European Central Bank on either September 8, October 20 or December 8.

So for choice I would be a seller of euro against dollar as there is one currency that will be buoyed by the expectation of higher interest rates.

EURUSD 5 Year Chart:
Source: Spotlight Ideas

Management and risk:

Parameters: EURUSD. 

Entry: sell 1.1187 13:42 BST (14:42 GMT) .

Targets: 1.1121 ... 1.1108 ... 1.1062 ...1.1048. 

Stop: 1.1260.

Time horizon: medium-term.

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
16 August
andywielkiszu andywielkiszu
Hi Stephen. Are You still fan of shorting euro on these levels despite of SL?
16 August
Stephen Pope Stephen Pope
I am...but have been stopped out. I will be away for a few days and so will not be opening fresh positions...but may well comment of EURUSD tomorrow.
17 August
andywielkiszu andywielkiszu
Thx a lot Stephen. Waiting for Your analysis!


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