It's just a few weeks since my last note on the euro-dollar but I think an update is appropriate given the continued battering of the single currency.
I mentioned in the previous chart analysis that the euro could fall quickly to $1.03 once the $1.19 mark (a particularly significant support level in 1998 and in 2003) has been breached, which happened on Monday.
The fall towards $1.03 may feel like a freefall plunge, but it is constrained by other technical features.
The euro is defined by a series of support and resistance bands. The positioning of these bands is important from an analytical perspective because it provides a method to project the future downside targets.
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Euro-Dollar Chart CLICK ON GRAPH TO ENLARGE |
The most important trading band is between $1.24 and $1.29. The width of this band is measured and projected downwards. It gives a downside target near $1.19. This support level has been breached.
The next historical support level in the immediate short term is $1.16. There is a higher probability the fall will dip towards $1.13 with a penetration to and a rebound to $1.16. This is the most bullish outcome in this environment. read more
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