Thursday, November 14, 2013

Why is the Euro not going down? Key levels to watch for the EUR/USD

A currency pair that I've been following for quite some time now, the EUR/USD, is puzzling at the moment. Especially after the European Central Bank's (ECB) rate cut to 0.25%. One would think it puts extra bearish pressure on the Euro, but instead it's trading sideways. And today there's bad news from Europe about its economy stalling? It grew just 0.1% in Q3, while 0.3% in Q2 of this year. Due to the incredibly over inflated Euro, European exports are hurting - which in turn takes a toll on the European economy. The culprit for a Euro that's high in demand isn't really the European Union itself, nor its policies for that matter. The EU wants a weaker Euro so it can be more competitive. Neither so much the US, although a monetary policy chance would be welcome - the US dollar is currently in danger of losing its reserve status, and is not a popular currency by any means. However, now the biggest possible reason is that the 'problem' possibly lies in Asia. Asian banks and financial institutions simply love the Euro. They keep buying up the currency for diversification/investment reasons, which is pretty much the main reason why the Euro doesn't want to come down at the moment. This imposes a big problem for Europe. Now, it seems the EUR/USD is slowly but surely crawling its way back up to 1.35 and beyond.

Key levels to watch for the EUR/USD trade

Time to analyze the key levels. In the short term the key levels are 1.3517 and 1.3331 (see chart below, green arrows).

Click chart for a larger version.

If the pair manages to break through 1.35 (psychological level) there's a good chance the bullish pattern will continue, though it's highly unlikely due to all the efforts of the EU to weaken its currency. Therefore I'm still (very) bearish on the EUR/USD despite the fact there's somewhat of a bullish trend going on right now. My level is 1.34 and below, I'm waiting to see if the uptrend continues to 1.35 or if it breaks below 1.3450. Remember this is a short term trade, the target is no more than a couple days in the future. Lets rake in a few pips!

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