EURUSD Analysis 11th – 15th June Update
A lack of risk appetite in the market has the EUR/USD moving lower during recent times, when risk appetite returns then the EURUSD moves higher. This has been the market reaction for quite some time now and looks set to continue. Everything else is taking a back seat when it comes to the 17-nation single currency.
Market speculators were looking for some kind of stimulus measures this past week but were left disappointed.
The Fed along with the ECB and BOE refrained from taking any action and the central banking community stuck to a “wait and see” back seat approach.
The ECB isn’t just going to stop supporting the troubled banks but Mario Draghi has made it clear that governments will need to sort out the banking sector; many banks could be in need of recapitalization and not just the Spanish ones. A Spanish bailout could be just around the corner as the finance sector feels the pinch in the eurozone’s fourth largest economy.
- A new record short euro position shows that large specs are still adding to bearish EUR wagers, according to COT Report data from the CFTC. Net short EUR FX positions from the Chicago Mercantile exchange have risen by approximately 11,000 contracts to 214.4k.
- Last week ended up 0.79% higher for the euro/dollar and gave a range of 239 pips which is 92% of the average weekly range.
- This all comes as the EUR/USD trades close to the multi-year lows area after printing a key reversal day at the start of June. The question is still “how much of the bad news has already been priced in”.
- This multi-year low is aligned with the 1 month time-frame 200 period moving average which has seen support on numerous occasions previously. In the absence of any significant negative news there could be a continuation of the short covering seen recently from this heavily sold area. Nonetheless, there could easily be a drop down to this previous support area if the Spanish bailout scenario gains traction and the right decisions are not made in a timely manner.
- To the upside, the price pivot horizontal level around 1.2630 has capped the EUR/USD on two previous rallies and could potentially do so again. A break above this level could see a squeeze on EURUSD shorts.