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EUR/USD – 2012/10/10

October 10, 2012 in Forex Analysis

In the update about EUR/USD’s onOctober 8th, we had mentioned that if the pair breaks below 1.2935/1.2925 then our outlook for immediate gains will start neutralizing. It happened and the currency pair had a sharp fall and went into the territory of 1.2800 and as low as 1.2858.

EUR/USD  – Daily Chart

EUR/USD Daily chart - October 10 2012


EUR/USD Ichimoku Cloud:

EUR/USD Daily Ichimoku cloud


EUR/USD Economic Releases

There have not been any important economic releases yesterday but some of the important economic highlights are as follows:

1) International Monetary Fund (IMF) cut the forecast of global economic growth for this year from previous 3.5% to 3.3% and for the next year i.e. 2013 from 3.9% to 3.6%. That brings year 2012 at it’s slowest growth path since the recession of 2009.

2) “Greece Creditors are yet to reach a mutual agreement about tacking of the debt crisis ” – A report from Dow Jones mentioned.

3) The budget deficit further increased in Greece  even with all the increase in taxes and cuts in spending like health care.

4) The huge capital outflows during the debt crisis and hence the need for the cash may force European banks to sell much more assets if the countries fail in their commitments of required spending cuts. International Monetary Fund (IMF) said that such a failure may require European Banks to sell assets in the range of 4.5 Trillion US Dollar. Earlier estimates/forecast  of April were for USD 3.8 Trillion and hence a rise of over 18%.

5) The positive data for U.S. Economy is that the national debt went to the lowest level of past 6 years. U.S. Debt is still high at 3.29 times of the GDP but it is the lowest level in past 6 years. The peak was 3.59 times of GDP in 2008.

EUR/USD – Technical Outlook

1) EUR/USD has broken below 22-day EMA support after finding some good support at that level initially.

2) Another important support which was broken was daily Ichimoku cloud’s upper edge support as shown in the Ichimoku cloud chart above. This break happened first time since August 21st i.e. after over one and a half months.

3) On a longer term time frame the weekly MACD still remains over the signal line and the gap is wide even though there is a loss of upward momentum there also.

EUR/USD Weekly Chart with MACD

EUR/USD Weekly Chart

EUR/USD – What to Expect

As mentioned that with the break of 1.2925 and 22-day EMA the outlook is for some more consolidation. Technically the next support levels expected are:

1) 1.2800/1.2805: The previous low of 1.2804 should act as a support level and the support of 55-day EMA should also work here. The 55 day EMA line is the red one on the EUR/USD daily chart above.

2) 1.2735/1.2755: If a decisive break of above mentioned support takes place then low of September 10th i.e. 1.2755 should come as further support. 1.2735/1.2739 would represent 38.2% retracement of the recent upward moves as indicated in the daily chart above.

3) 1.2715 level represents the support level of the lower edge of the daily Ichimoku cloud.

The above outlook stands good till support at/below 1.2990 holds. Any break above that will turn the focus back towards upside.