Divergence in euro complex

eurodollar7From a technical perspective last week was not an easy one for the euro with a divergence of sentiment across the complex. Against the USD it found some much needed support at the 1.0825 support level, which provided the springboard for a move up and through the VPOC on the daily chart at the key 1.09 price point. The pair managed to maintain this bullish momentum through to the end of week before finally ending the week at 1.1004 on reasonable volume. However, this move higher has, so farfailed to follow through in today’s trading session with the 100 ema providing the cap. Bearish sentiment towards the euro has also increased in the futures market where shorts have added 18.1k contracts taking the total gross short position to 172.5k, the largest increase since November 2015.

This week we also have the ECB interest rate decision and obligatory press conference, and given the current economic downturn in the eurozone, the market is expecting Draghi to increase the current bond/asset buying program, or even an announcement of some new and innovative measures.

euraud7With eurodollar somewhat constrained, euro brears may wish to consider the eur/aud where bearish momentum has continued, and provided the pair take out the key support at the 1.4735 region, then expect a quick momentum run to 1.4644.

csi7Finally for a view of market sentiment on the longer term timeframes, our currency strength indicator may provide us with some clues. And here while we have the euro oversold on the daily chart, and the likelihood of a possible move higher, this has to be placed against the context of the weekly chart where sentiment is still heavily bearish, in parrticular against the Aussie.

 

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