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EUR/USD - A brief analysis

Posted by Akhilesh Ganti on Mar 25, 2013 7:49:00 PM

The Euro initially spiked higher when news of a deal with the EU broke midway through the Asian session yesterday only to see the momentum fade around 1.3050 which also happened to be the 25-day exponential moving average. It abruptly reversed course as the trading day progressed as sellers started to emerge and what should have been a positive day for the common currency quickly turned into one where it was punished into making new lows -vs- the dollar for the year.

There were any number of reasons offered for the whipsaw action (a Dutch Finance ministers' ill-timed comments, trepidation of what will happen in Cyprus when the banks finally do open) but the inescapable fact seems to be that the market has concluded that this deal does not solve anything. Rather, this is being viewed as a desperate attempt, much like putting a band-aid over a bullet wound, to temporarily avoid confronting the systemic problems that face Europe.

{chart:Bloomberg}(click on chart to open in new tab)

Eur 032613 D

A quick look at a daily chart shows that the pair is sitting just below 1.2877 which had been pretty strong support and is also the 50% fibonacci retracement of the up move from 1.2043 to 1.3711. A continuation of this move could potentially target the 61.8% level which comes in at 1.2680 and is just above the 1.2660 low seen in November of last year.


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