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Conflicting Technicals Keep EUR/USD Range-bound

David Becker
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Conflicting Technicals Keep EUR/USD Range-bound

EUR/USD is trading in a holding pattern despite the bund dipping below 1% after fractionally dropping to a 1.3381 low. The pair failed to sustain gains above 1.3400 on each of the last three days last week, which maintains a heavy technical feel to the euro, although an extreme level of net euro shorts has at the same time been curtailing downside progress. The Ukraine situation as well as the weaker than expected economic data have weighed heavy on the currency pair. Resistance is marked at 1.3410, which encompasses the daily highs seen last Wednesday through to today.

The Eurozone trade surplus came in at EUR 13.8 billion in May, below the Trading Economics survey median for EUR 15.4 billion, which matched the surplus seen in April. The unadjusted figures painted a brighter picture, with exports gaining 3.0% and imports by 2.0% in the year to June, but the adjusted data showed exports were down 0.5%. Trade sanctions on Russian, the impact of which has not really started to appear in trade figures, will to take a toll on data over the coming months. Exports to Russia, the euro zone’s fourth- and European Union’s third-largest business partner, have already fallen by 14% and 12% respectively from January to May.

The technicals showing conflicting pictures. While the 100-day moving average crossed below the 200-day moving average reflecting a negative long-term trend, the MACD has simultaneously generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index has moved from negative to positive territory confirming the buy signal. The RSI has held steady reflecting consolidation while printing near 41, which is on the lower end of the neutral range.

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