EUR/USD Stuck Between Close Resistance and Support Levels

September 25, 2012 in Forex Analysis

EUR/USD is finding resistance exactly at 5-day EMA (green line in the following chart) and support at 22-day EMA (Yellow line). A classical example of supports and resistances.

EUR/USD Daily Chart:

EUR/USD daily chart - September 25 2012

 

Recent Past:

ECB President Draghi’s rescue plans followed by German Constitutional court’s favorable decision for German standing for the same had boosted the optimisms and had taken EUR/USD above the psychological level of 1.3000 and as high as 1.3172. The pair found strong resistance there, before testing the previous high of May 1st i.e. 1.3284.

What to Expect:

As mentioned above that the currency pair is stuck up between the 22-day EMA support and 5-day EMA resistance, a break of one of these is required to expect further directional movement.

Today the market should be less volatile till the outcomes of ECB President Draghi and German Chancellor Merkel’s meeting about EU situation and then Draghi’s speech at 13:00 GMT. These two events are important and market should be waiting for these two before some ┬áreal moves take place.

Overall on one side the recent optimism for the rescue plans for the debt crisis has gone in favor or Euro but on the other side the uncertainties remain about Greece reaching an internal agreement to meet the conditions for the rescue and also because of Spain’s hesitation to come forward with the decision to ask for full rescue.

Yesterday’s reports about German business confidence were also not good and tomorrow (GMT 00:00) we have important Consumer Price Index data coming up from Germany.

Considering all the above during these two days i.e. today and tomorrow the movement of EUR/USD will be mainly dependent on the News from Euro zone as no important data is scheduled to come from US.

Near Term Targets:

If the news from Euro zone about the above mentioned meeting and Draghi’s speech bring pessimism and the current support over 1.2880 breaks then we can expect further consolidation first towards 1.2830 and then possibly towards the 38.2% retracement of the recent upward move i.e. towards 1.2740/1.2760. ┬áTill any strong break below 1.2700 takes place, we would expect the short-term bullish mood to continue. With these supports holding, another break of 1.3000 should take EUR/USD for a test of previous resistance zones of first near 1.3280 and then possibly 1.3380.

 

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