On Thursday, the euro increased against the US dollar to a 2-month high amid the weakening of the worries about the Eurozone sovereign debt and the strengthening of the fears concerning possible pause in the US economy recovery, which was caused by the weak fundamental statistics recently.
In the first part of the day, EUR/USD was trading mainly in a sideways channel 1.2710-1.2764, but then, having broken out the key resistance level of 1.2802, the pair rose by more than 164 points.
The trading day closed with the euro advantage, which edged up versus the greenback by 207 points, the volatility totaled to 245 points.
Fundamental review:
The European currency got a strong support from the successful results of getting hold of capital by Greek, Spanish and Portugal governments. Investors are also expecting that the results of the European banks stress tests, which are due to release July 23, will report about the financial sector status of the region.
It should be noticed that yesterday Spain successfully placed bonds of the amount of 3 bln. euro that increased the investors’ confidence in that the Eurozone debt crisis is coming to the end.
The American currency was pressured by the weak fundamental data.
The US initial jobless claims shrunk during the week from 4 to 10 of July.
According to the US Labor Department, the initial jobless claims fell by 29K to 429K, while economists were expecting a drop of 9K.
The previous week data was revised upwards from 454K to 458K.
The core producer price index rose by 0.1% in June and matched the expectations.
Sector being the leader of the American economy recovery recently, showed the first signs of weakening.
The US industrial output went up less-than-expected. In accordance with the reports, the total industrial production rose by 0.1% in June, while the reported growth in May was 1.3%.
The experts predicted a decline of 0.1%.
The US PMI slowed the growth as well. The reports showed that the total Purchase Managers Index was 5.1 in July against 8.0 in June and 21.4 in May. The reading of 10 was forecasted.
Technical analysis:
The pair rose to a new 2-month high and practically reached the first significant resistance level around the 30th figure bottom. The trading is held in a rising price channel started July 14, 2010, with the yesterday’s low and the highs from July 14 (1.2777) and from July 15 (1.2954).
For the further advance, EUR/USD is necessary to close above 1.2460 and continue the growth to 1.3000 area, from which the way to 1.3054 will be opened for the pair. However, ahead the further hike a correctional decline will take place definitely.
Today is Friday, and perhaps many investors will fix the profit on long positions because the pair has increased by more than 258 points.
In case of the drop, the first support level will be at 1.2869, after the breakout of which the fall will continue to 1.2831 and then to 1.2777.
Bollinger bands are up-directed and the trading is driven in the upper area of the bands. The middle band is a dynamic support placed at 1.2898 area.
MACD is in the purchase zone and any short-term decrease of the pair can cause a new growth wave.
Today’s recommendations:
Support levels: 1.2869, 1.2831, 1.2777.
Resistance levels: 1.2954, 1.3000, 1.3063.
Today it is advisable to buy the pair at 1-hour timeframe closing above the level of 1.2956 with a target – T/P 1.3029 and S/L 1.2923.
It is possible to sell at the closing of 1-hour timeframe below 1.2900 with a target – T/P 1.2830 and S/L 1.2933.
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