by Nick Simpson, Forex-FX-4X
- The near term EUR/USD bottoming scenario continued to play out on Friday, when the major currency pair came within 10 pips of the key 1.3000 handle, as sentiment remained resiliently upbeat. Euro/dollar closed the week in the “price zone” between the 61.8% Fibonacci retrace and 1.3000 round number.
- There was a strong upside move on Thur/Fri, and a further squeeze on the shorts, after the break above a technical area comprised of the descending trend line, previous 1.2800 area resistance highs and 200 SMA level.
- Any move lower may see an element of support around the 1.2880 area price pivot zone. The 1.2880 -30 zone is likewise a horizontal price pivot and is roughly aligned with the 200 period daily SMA.
- 1.3000 is our key near term focus heading into next week with a sustained upside break possibly opening up a test of the 1.3138 area previous swing high.
- A resistance rejection failure around 1.3000 was experienced last time price hit the level on the 25th and 30th October. Current momentum favours a break above this area but net gains could initially be limited, with a pullback potentially needed prior to another push higher.
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In related markets we note the following:
- The euro also reached a seven-month high versus the yen, as EUR/JPY gained over 3%, and has seen a rally of approx 350 pips over the weekly basis. This came as European equity markets had posted the best week seen in 2012.
- The benchmark S&P 500 index climbed back above the psychological 1.400 area on a quiet and illiquid week (due in part to US Thanksgiving holiday). The S&P 500 gained over 3.5% on the weekly basis, the strongest week-on-week rally since June.
- Gold broke above recent resistance on Friday to hit the highest level seen in over a month, thus adding an element of additional bearish pressure to the near term USD outlook.
- The USDX found resistance at the Fibonacci confluence area we highlighted as the “key near term technical level” in our last dollar index analysis post and has subsequently seen extended downside.
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- Forex FX: Dollar Index Analysis – USDX – WC 26th November
- 23rd November – EUR/USD Technical Analysis Update
- Forex: EURUSD Technical Analysis 21st November 2012
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