Daily Technical Analysis:
EUR/USD has tested SMA5 and SMA10 on Friday. SMAs are now moving and contracting in bullish sequence, with market is moving between SMA10 and SMA15.
RSI is showing decreased bullish strength with 66% reading. RSI is now reverting back from uptrend in downward direction below resistance level (70%).
Upper, Middle and lower bands are moving upward with expended bands. It signals that market is decreasing bullish volatility. Market is moving between upper and middle band.
With Lutfi Magnet theory market is 81% bearish and with adjustments 60% bearish. Lutfi Magnet Theory and Adjustment are showing bearish sentiment.
On the basis of Technical Analysis initial bias remains bearish for further corrective moves. Market may attempt low at 1.2951 and then Friday’s low at 1.2920, break there may follow the bearish biasness to low at SMA15 1.2891. While on higher side it may follow consolidation to attempt high at SMA10 1.3000, break there may attempt high at weekly magnet 1.3045.
Despite ending higher to 1.3171, subsequent retreat indicates that a short term top is in place. Some more consolidations would be seen in near term and deeper fall cannot be ruled out. But downside is expected to be contained by 1.2816 support (38.2% retracement of 1.2255 to 1.3171 at 1.2821). An upside breakout is anticipated and break of 1.3171 will target 1.3486 key resistance, which is close to 50% retracement of 1.4939 to 1.2042 at 1.3491.
The Euro advanced against the U.S. dollar on Friday, as reports of an imminent bailout plan for Spain overshadowed the previous day’s disappointing economic data and boosted demand for risk-related assets.
The single currency strengthened after the Financial Times reported earlier that European Union authorities are working behind the scenes to pave the way for a new Spanish rescue program and unlimited bond buying by the European Central Bank, by helping Madrid craft an economic reform program that will be unveiled next week.
Talks between the Spanish government and the European Commission were said to be focusing on measures that would be demanded by international lenders as part of a new rescue program, ensuring they are in place before a bailout is formally requested.
Separately, negotiators discussing Greece’s bailout came closer to an agreement in late night talks, but were still short of a final deal that would unlock the next installment of Greece’s EUR31.5 billion bailout packages.
Here is schedule for today’s important data:
German Ifo Business Climate: Monday, at 11:00am. Germany’s No. 1 Think Tank showed deterioration in the business climate in the past 4 months, reflecting the worries about the debt crisis. After falling to 102.3 points last month, a small rise is expected now in this 7000 strong survey, to 102.7 points. It’s important to note that the other important survey, by ZEW, surprised to the upside.
USD No Data: No major data is expected for the day.
Euro/dollar corrected some of the huge gains following the announcement of QE3. Both Greece and Spain are in the limelight, as uncertainty prevails. Tensions within Spain are growing after Spanish PM gave a clear negative answer to requests for a new fiscal pact with Catalonia. The rich region is set to accelerate its moves towards secession from Spain, in a not-so-favorable timing for the country. In Greece, the troika took a break after reporting progress. This seems like a repeat of the previous round that ended in a revolving door exercise from the ECB to buy time. In the US, figures remain mediocre, implying the QE3 could indeed be QE-infinity. Spain will have an opportunity to ask for aid when it presents its budget. In addition, a speech by Draghi, an important German survey and Italian bond auction are among the big events awaiting markets.
The US dollar corrected some of its huge losses in the aftermath of QE3, cutting a losing streak of 4 weeks. Last week US Existing Home Sales surprised traders with a leap to an annualized 4.82 million units from 4.47 million in July, confirming the growth trend in the housing sector. Meanwhile the number of weekly unemployment claims dropped to 382, a mere 3,000 drop from the week before indicating a slowdown in hiring and a struggling job market. In Europe, Spain enjoyed a successful bond auction. German Ifo Business Climate, CB Consumer Confidence US housing data and unemployment claims are the major market-movers on our calendar. Here is an outlook on the major events this week.
EUR/USD Last Week:
EUR/USD started the week at 1.2512, with a downward move to low at 1.2464, but found support there and then went up to high at 1.2636. The pair closed week at 1.2576.
EUR/USD began the week at the highs seen in the previous one at 1.3169, but gradually slid lower. After an encounter with the 1.3000 line, the pair continued lower and bottomed out at 1.2920 and closed at 1.2981.
Today the Euro opened the day at 1.2976.