Euro to Dollar Still At Range Highs But Losing Momentum

Euro to Dollar Still At Range Highs But Losing Momentum

7 April 2016, 13:07
Vasilii Apostolidi

Where next for EUR/USD? We ask the experts.

The EUR/USD pair has been going sideways since bottoming a year ago in March 2015.

It is currently knocking on the ‘trap-door’ of the range ceiling which lies between 1.1495 and 1.1577. 

The big question is whether EUR/USD will actually break out of the top of the range and push higher, or whether it will fade back into the middle.

We ask a panel of leading analysts were they think EUR/USD will move next.

Commerzbank’s Karen Jones, sees a break above the 1.1577 pivot level as critical for opening a way up to the next target at the 1.1713 December spike high.

Pivots are levels calculated from the previous period’s high, low, open and close, and represent key market levels which traders use to judge the pulse of the market.

They are also the locus of bundles of counter-trend orders laid to take advantage of the rebounds (or bounces in a down-trend) which inevitably occur when the exchange rate reaches them.

“Resistance at 1.1577 is considered the last defence for the 1.1713 September high.”

The lack of momentum which accompanied the most recent wave up to the range highs, however, is a negative indicator for short-term, however:

“EUR/USD’s high on Friday at 1.1438, was not confirmed by the daily RSI and this suggests a loss of upside momentum just ahead of the September and October highs at 1.1460/95 and the 1.1577 pivot line.”

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Lloyds See Waning Momentum as Warning Too

EUR/USD will fail to breakout of its year-long range and continue to go sideways for the foreseeable future, according to Lloyd’s Banks’s Analyst Robin Wilkins:

“Medium/long-term we remain trapped in a range, since last March, between 1.0450 and 1.1465. We expect this range to remain intact for now.”

A move below 1.1320/1.1280 is required to suggest the range ceiling has successfully rebuked the exchange rate. 

A break under the 1.1180 lows would open the gate to a run down to the 1.0800 handle.

Despite the bearish forecast, Wilkin’s sees a lower threshold for confirming a bullish breakout from the range, arguing the critical level to supersede is 1.1465 instead of 1.1577 as in the case of Commerzbank:

“With a break above 1.1465 risking not only a re-test of last August’s spike high to 1.17, but potentially a move towards 1.20-1.23, before the market finds significant resistance in this region.”

Maintaining a Bearish Line

The EUR/USD pair will fail to break out of the top of the range and instead decline back down to the lows at 1.0504, according to analysis from online broker Swissquote:

“In the longer term, the technical structure favours a bearish bias as long as resistance at 1.1746 holds… The current technical deterioration implies a gradual decline towards the support at 1.0504 (21/03/2003 low).”

The top of the range is at 1.1453; any breaches of that level will probably lead to a move up to 1.1640 which is likely to, “cap price appreciation.”

Stronger support is expected at 1.1058 - another test of 1.1400 is forecast despite the bearish overtones.

Top Probably in Place

EUR/USD may have alreaduy formed a top which could possibly roll-over and fall back down into the range, according to Hantec’s Market Analyst Richard Perry:

“The bulls are still fighting to hang on. Despite this though there is still a feeling that there is a near term top in place at $1.1437 (underneath the long term range resistance at $1.1465) and there will be a near term corrective move.”

Perry also points out waning upside momentum with RSI coming out of overbought.

The 1.1332-34 price level will be critical in defining the direction of the next move; if it is breached the pair will probably fall “100 points” back into the centre of the year-long range, if it holds then the bulls will take another run at the 1.1465 range highs, and try to bash their way out. 

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