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Euro Rebounds but Remains Heavy

Posted by Joseph Trevisani on Jan 15, 2014 10:20:00 AM

The euro has rebounded from 1.3582, a figure below the Asian high at 1.3681, as buyers were firm ahead of 1.3572, the January 6th and 10th low and the base of the rising trend line (1.3570) that goes back to November 7th.

Two proximate reasons for the euro weakness are the higher U.S Treasury yields and the slight miss in German 2013 GDP. The 10-year is up 3 basis points to 2.90% after touching 2.83% on Monday in the wake of last Fridays disappointing jobs report. German GDP was 0.4% for the year, 0.1% below forecast and only a bit more than half the 2012 0.7% growth. The German economy suffered from slower exports and another drop in business investment.  But the underlying causes of the euro's recurring weakness are the diverging rate policies of the ECB and the Fed and the desire of European and ECB officials for a lower euro.

The entry to a lower range is likely to be 1.3550, with good buying above (100 day moving average 1.3557) and stops below. The low on January 9 was 1.3549 and on January 8th 1.3554. Before that the euro last traded there on December 5th, (1.3543). For most of November the euro was below 1.3550 until the conclusive break higher on November 26th. After that break the euro traded below 1.3550 in just four sessions and closed below only once (December 2nd, 1.3542).

If 1.3550 breaks there is likely to be good demand at 1.3524, the 61.8% Fibonacci of the November 7th-December 27 run, 1.3296-1.3893 and the low on December 2nd, 1.3526 and December 3rd 1.3524.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts:  Bloomberg




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