Technical analysis: No let up for euro
Technical analysts at Commerzbank – voted number one for banks in this year’s Euromoney FX Survey – see no respite for the single currency, as the EUR plunges to a two-year low against the USD.
“We have recently seen the market break down from a symmetrical triangle pattern and the outlook for EURUSD remains negative,” says Karen Jones, head of FICC technical analysis research at Commerzbank.
EURUSD - daily chart negative
That target is achievable within six weeks, which is the length of time the range took to complete – in other words, by end of August. The immediate downside target is the $1.2053 200-month moving average.
“It is quite common for market to return to point of break out from these patterns,” she adds. “The previous triangle support at $1.2463 should now offer immediate resistance and the market will be immediately offered below here.”
Jones also maintains a bearish bias on EURGBP, now it has broken down from its converging range and hit multi-year lows.
EURGBP breaks down from converging trend into multi-year lows
She says now the £0.7950 May low has been taken out, the bear trend in EURGBP should continue.
Longer-term, Jones targets the 61.8% Fibonacci retracement of the 2007/08 advance at £0.7786. Her initial target is the base of the 2011/12 channel at £0.7826.
“Overhead, the market faces tough resistance at £0.8145/65,” she adds. “This represents the 2011/2012 resistance line and the 38.2% retracement of the move down from February.
“While capped here, our negative bias remains fully entrenched. We suspect, however, that the market is now likely to be capped by £0.8000.”
However, Jones says she has covered her short EURGBP, since while she remains bearish, it has been a sharp drop and she simply wanted to lock in some profit.
Here is a summary of Commerzbank’s technical team’s recommendations.