EUR/USD Technical Analysis: aiming above 1.14 with 100 day SMA crossing

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.06.03 12:43

Goldman Sachs - Get Ready For The Next Leg Lower In EUR/USD (based on efxnews article)

"Conviction levels that the Euro can resume its downtrend are as low as we can remember. Most see the single currency in a range near current levels, with the current account surplus, the rise in oil prices and valuation preventing another meaningful leg lower. We do not think it is these things that are at play; in fact, we disagree with each of them on a conceptual level."

The current account: "exchange rates, like other market prices, are forward looking. They reflect expectations for the future, including the likely level of the current account. The mere presence of a current account surplus (or deficit) therefore does not mean that a currency strengthens (or weakens), because this is already in the price. Instead, what matters is the delta, i.e. whether the current account comes in stronger or weaker than expected... The net effect, in delta terms, looks unclear to us – our European team forecast a stable current account surplus through 2015/16 – and likely EUR/$ neutral."

The rise in oil prices: "core inflation in the Euro area was trending down long before the drop in oil prices, a reflection of structural reforms on the periphery (that aim to improve competitiveness through internal devaluation) and large output gaps. Core HICP is likely to stay near current levels in coming months, even as headline inflation rebounds further, and this is likely to see the ECB shift its focus back to core (away from headline). This should see EUR/$ weaken."

Valuation: "the Euro is now arguably cheap on some metrics. Indeed, GSDEER says that fair value for EUR/$ is 1.22, so that we are currently in “cheap” territory for the first time in many years. In our minds, fair value only matters if it acts as an attractor, i.e. if it means that it exerts a force of gravity when EUR/$ undershoots it. There is no empirical evidence that this is the case. In fact, the only thing that is clear about fair value models is that exchange rates in practice over- or undershoot them, but never converge to them. We again see this discussion as a sideshow for EUR/$."

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.06.03 06:55

EUR/USD Technical Analysis: Resistance Now Above 1.12 (based on dailyfx article)

Resistance	Support
1.1202	1.1005
1.1320	1.0818
1.1439	1.0692

The Euro advanced against the US Dollar as expected after putting in a bullish Morning Star candlestick pattern. Near-term resistance is at 1.1202, the 38.2% Fibonacci expansion, with a break above that on a daily closing basis exposing the 23.6% level at 1.1320. Alternatively, a reversal below the 1.1005-1.1055 area (horizontal pivot, 23.6% Fib) clears the way for a test of the May 27 low at 1.0818.