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Forex: EUR/USD builds a reversal pattern above 1.30 helped on Cyprus deal agreement

FXstreet.com (Barcelona) - EUR/USD has managed to climb above previous Friday's highs 1.3010, printing fresh 6-day highs at 1.3051, on the back of an agreement between the EU, FMI, ECB and Cypriot authorities. The pair opened the week in Asia-Pacific gapping lower as conversation during the weekend did not progressed fluidly, reaching a session low at 1.2941 EUR/USD in interbank pre-market.

This low at 1.2940 is a pull back to a previous descending trend line broken on Friday, and coming from March 15 highs, as well as the neck line of an inverted head and shoulders reversal pattern built since the massive gap down it followed news on Cyprus bailout conditions, past weekend. This gap has not yet be filled.

“The next near-term resistance levels to challenge a bullish correction are at 1.3075 and then 1.3160,” says CMT and FXstreet.com Independent Analyst Fan Yang, adding: “A return below 1.2925 however can revive the bearish outlook,” he suggests. The pair is up +0.41% for the week so far, and still -1.19% under water year to date.

According to latest COT, published last Friday reporting on positions held past Tuesday in futures and options markets, commercials traders, those who hedge an underlying asset, added to net Euro longs, while speculators, both big and small, took the other side of the trade. Commercials started to reverse positions from net short to net long by early March, coming from heavily net short by early Feb around the 1.37 EUR/USD highs.

At the same time, commercials also show extreme net short positions in USD index, which accounts for a 62% in Euro for the composition of the index, being short in this USD index by 9 out every 10 commercials, a very heavy ratio, meaning almost all commercials have decided to hedge USD at around the 83 round level, being the 82.7 a previous strong resistance, while speculators hold the other part, almost completely. While commercials keep adding to standing positions, known also as "strong hands", not reversing till in favour, less and less speculators are left in the other side enough to keep pushing prices to the upside.

“Technicians will be looking for last Monday’s opening gap to 1.3050 to get closed” in EUR/USD, said FXWW founder Sean Lee, “but given the current environment in the EZ, and the positive economic developments in the US,” he adds, “I find it hard to be bullish on EUR/USD,” the analyst concludes.

Later on at 17:15 GMT Monday FED Chairman Ben Bernanke will speak at the London School of Economics at a panel discussion along BoE Marvyn King, while Tuesday at 12:30 GMT US core durable goods data will be released, followed by CB consumer confidence in the US, and New home sales, at 14:00 GMT, all of which will be closely watched by market participants.

Also worth mentioning Japan PM Abe will hold talks with the EU later today at 6.30pm Tokyo time (0930GMT) according to Suga, Japan's chief cabinet secretary. Talks to include explanation of the Cyprus bail-out, editor Eamonn Sheridan at ForexLive reported.

For the Cyprus front, Moody's announced today that even if current crisis is over, the island state is at risk of default, FXBriefs.com said.

Eurogroup reaches agreement with Cypriot authorities

Already finished Eurogroup and FMI press conference, attending IMF chief Christine Lagarde, Eurogroup Chairman Jeroen Dijsselbloem, EU's commissioner for economic affairs Olli Rehn , European Central Bank (ECB) board member Jorg Asmussen, and ESM managing director Klaus Regling, the Eurogroup has reached an agreement with the Cypriot authorities “on the key elements necessary for a future macroeconomic adjustment programme,” the official Eurogroup statement reads.
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Session Recap: Cyprus deal boost Euro and risk appetite

EUR/USD broke to the upside today in Asia-Pacific following an initial gap lower during the interbank premarket to session lows at 1.2941 as uncertainties over Cyprus were rising given negotiations were taking longer than expected.
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