On Friday, the European currency was trading with high volatility during whole day because large investors were waiting for the European banks stress tests results.
On the European session, the pair had risen to a new local high around 1.2964 amid the Eurozone’s positive fundamental data. However, on the North American deals the euro showed a sharp decrease against the US dollar after investors had made a conclusion that the European banks stress tests results would be too liberal.
The trading day closed with the euro advantage, which climbed by 22 points versus the buck, the volatility amounted to 172 points.
Fundamental review:
In the first part of the day the European currency increased against the US dollar to a day high after the positive reports about Germany’s business sentiment index had turned to be a lot higher the expert forecasts. This fact strengthened confidence in the country’s economy recovery.
The German business sentiment index went up by 4.4 points in July and totaled to 106.2 points. Experts had expected the index to decline to 101.5.
The Consumer confidence growth in Italy also supported the single currency.
According to reports, the Italian consumer confidence index rose to 105.6 in July versus 104.5 in June. Economists had been predicting a drop to 104.
The consumer spending in France fell in June. In accordance with the French Statistical Office Insee, the consumer spending index tumbled by 1.4% in June compared to May and decreased by 1.9% over the previous June. The expectations of analysts had been 0.5% growth.
Concerning stress tests results, all banks excluding 7 from 91, passed stress tests and these 7 banks just needed small additional capital, as the CEBS announced on Friday. It one more time points at both stable Eurozone recovery and good perspectives of the euro in the future.
Technical analysis:
The trading is held in the upward price channel from July 21. The lower limit of the channel goes through 1.2732 and 1.2793 lows. The channel upper limit passes through Friday’s high recorded at 1.2964 area.
During today’s Asian trading, EUR/USD has ticked down to the support level of 1.2909, which holds the pair from further decline. In case of a breakout of this level, the fall can continue to 1.2870 area and after to the area of 200 day exponential moving average, which lies in 1.2838 area.
In case of growth, the first resistance level will be 1.2965. If this area is broken through the movement can last to 1.3026 and approach the high of 1.3063.
Bollinger bands are practically parallel, indicating high market volatility. The trading is driven in the upper part of the bands close to the mid-band, which holds the pair from further falling and is dynamic support.
MACD is in the purchase zone and any short-term downward motion of the pair can cause a new growth wave.
Today’s recommendations:
Support levels: 1.2909, 1.2870, 1.2838.
Resistance levels: 1.2965, 1.3026, 1.3063.
Today it is advisable to buy the pair at 1-hour timeframe closing above the level of 1.2945 with a target - T/P 1.3009 and S/L 1.2913.
It is possible to sell at the closing of 1-hour timeframe below 1.2893 with a target – T/P 1.2834 and S/L 1.2930.
Performed by Maxim Magdalinin, Analytical expert
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