Saturday, July 17, 2010
EUR/USD. Clear break of downtrend resistance
EUR/USD (1.2824) is up overnight on the back of Spain’s successful debt issuance, and spot has now clearly broken above the downtrend line off the December and April highs.
Trend: Daily lower; Weekly higher.
Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.
Support / Resistance Levels: Support for EUR/USD lies at 1.25 (psychological), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2835 (Jul15 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).
The CFTC, EUR, non-commercial, net position (-38K) moderated, in keeping with the price action through last Tuesday.
The risk reversal (3m, 25delta) ticked higher along with spot. The reversal is still heavily skewed for EUR downside, but it lies in the middle of its six month range – suggesting two way price action.
Implied Vol (3m) slipped overnight and is trending lower into the bottom ½ of its six-month range.
Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).