FXstreet.com (Barcelona) - Same old story one more day in the
EUR/USD, with the spot rate back to Friday's NY close around 1.2950
as both sovereign bids and asset managers continue to play the
range game. The pair is mainly driven by sentiment these days, and
a rebound during the last NY trade was enough for the pair to pare
early Monday losses. In Asia, buyers outnumbered buyers by some 10+
pips, although nothing to read into the move.
According to Valeria Bednarik, Chief Analyst at FXstreet.com,
"while stocks edged higher around the world, risk appetite was not
enough to push euro beyond 1.2990 past Friday high, another signs
bulls may be getting too nervous over Spain." There is lots of
speculation regarding if/when Spain will bite the bullet.
Meanwhile, latest headlines suggest the Troika may recommend to EZ
FinMins that Greece is given an additional 2 years to meet budget
deficit targets.
Some media outlets and banking institutions, like Westpac FX
Strategist Sean Callow, argue that "the background remains EUR
supportive", especially after Reuters reported that a Spanish
bailout is planned for November, with Germany's intentions being to
make it coincide with aid for Greece and Cyprus, according to
senior unnamed Eurozone officials. However, this may be a
double-edged sword, as certain sectors of the market perceive
another Spain delay as disappointing.
Technically, the EUR/USD ascension since Sept 18 high is forming a
triangle - lower highs and higher lows -, a pattern suggestive of
narrow fluctuations for now aka 'times of tranquility before the
storm.' Triangles are, as a rule of thumb, continuation patterns,
thus when the breakout occurs, chances are it should be higher as
per trend formed since 1.2040 late July bottom.
From Fan Yang, Technical Expert at FXTimes: "The overall structure
of the EUR/USD has turned into that of congestion as
it makes lower highs since the 1.3170 high, and higher
lows since the 1.2804 low."
Another interesting technical reading is the relevance of the 200
day SMA as of late, a pivotal level picked by buyers that is so far
supporting lows; expect sizeable stop loss orders clustered right
underneath 1.2800/1.2775 - not particularly at risk at this stage -
yet worth noting.
For now, the range seems inevitable, as sovereign names and asset
managers remain on both sides of the market. Further encouraging
the stand-off by buying/selling forces to unravel 'the range
battle' are doubts over duration and depth of QE3 by the Fed.
Weighing on the expansion of the range-bound story for now are also
fears of being caught short EUR/USD when Spain decides to request
the rescue package.
In case a bullish scenario happens to come into play, "a break
above 1.30 is not enough for the bullish outlook and a
break above the congestion resistance near
1.3025-1.3030 would be the first sign" Mr. Yang notes.
However, what really matters for a true technical statement to be
made is the break of a falling trendline at 1.3170, says the
FXTimes Analyst; "the break above that trendline is going
to be a game changer as it can open up the 1.3487, 2012-high."
According to Sean Lee, Founder at FXWW, "Interbank dealers report
plentiful stops situated above recent highs at 1.2995 and again at
1.3020, which may be targeted soon if no pullback ensues. The US
corporate offers which capped the pair on Friday may not yet have
been replaced, leaving shorts vulnerable."