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Debt Scenarios Still Weighing on Euro

Currencies / Euro May 11, 2015 - 08:57 AM GMT

By: Richard_Cox

Currencies

When we hear the words “sovereign debt crisis” it might seem as though we are reading financial news headlines from several years ago.  But when we look at the underlying fundamental activity in the Eurozone, it quickly starts to become clear that this is simply not the case.  If we look at the region as a whole, there are some significant discrepancies that are negatively impacting some regions more than others.  This can have a catastrophic on a regional economic that is trying to use the same monetary system, so it should still be clear at this stage that the region’s debt issues are far from over.


All of these factors have not been lost on the Euro currency itself, which has met significant selling pressure over the last year.  For those of us that have experience in trading with stocks and ETFs, it should not come as a surprise that we have seen major differences in the price behavior that has been shown in the Guggenheim CurrencyShares Euro Trust (NYSE: FXE) and the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP).  But for those of us that are mostly focused on the forex realm, the most direct route to expressive views in these markets is through the EUR/USD.  For these reasons, it is essential to have a clear understanding of the most important support and resistance levels when looking at the long term view in this here.  Here, we will outline some of those areas and give some ideas for strategy if any of these areas are broken.

__________________________________

EUR/USD - Euro vs. US Dollar

Critical Resistance:   1.1480

Critical Support:   1.0520

Trading Stance:  Bearish But Upside Possible

(Chart Source:  CornerTrader)

EUR/USD Forex Strategy:  Majority momentum is clearly bearish but there is a better potential for a rally if we can see resistance at 1.1480 break.  Major support to the downside now rests at 1.0520.

Overall, we must continue to call the activity in the EUR/USD a downtrend as we have yet to break any meaningful resistance levels in recent weeks.  This does not mean that this scenario will last forever, however, so if we do see a break of resistance at 1.1480 there should be some follow through.  Risk to reward favors buying into support near 1.0520 but keep stops tight as any downside breaks there could send prices much lower very quickly.  MACD readings are now in positive territory, so there could be some improved activity into next month for the EUR/USD.

By Richard Cox

© 2015 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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