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Bailout Fund Pressure Mounting: EUR/USD Analysis

Bailout Fund Pressure Mounting: EUR/USD Analysis

Euro/Dollar Update 27/9/11

Euro-zone officials are said to be discussing strategies to increase the firepower of the bailout fund following concern from world’s finance ministers around potential for a financial market meltdown.  The Washington based IMF meeting, last weekend, had the U.S. along with other key nations pushing European policy makers to boost the  proportions of the current near $600  billion fund.

U.S. officials are advocating swift steps to lessen the broad-based market fear, however, open resistance from Germany and other euro-zone nations implies no deal is probable prior to the meeting of the Group of 20 industrialized and developing economies – which is scheduled to take place in November.

eurusdanalysis20110927 0822 thumb Bailout Fund Pressure Mounting: EUR/USD Analysis

Technical Analysis Overview

  • On the back of this current stalemate situation, the range-bound consolidation recovery has carried through the overnight trading and euro/dollar price has been capped at the support turned resistance level – around 1.3569.  This is also the Fibonacci 38.2% retrace of 1.3936 > 1.3361.   
  • Any break higher would need to contend with previous resistance at the 1.3720 area which is also the 61.8% Fibonacci retrace of  1.3936 > 1.3361.
  • A failure to move above current resistance highs could bring the 1.3394 area range support lows back into focus on an intra-day basis.

Our medium term bias remains to the downside but a break above current resistance could potentially see corrective price action, to the upside, in the near term. 1.4000 is still seen as key resistance but could possibly be out of reach for now as investors continue to move to safe haven dollars.

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