EUR/USD Little Changed in Quiet Trading
Frankfurt (May 29) EUR/USD is little changed from Friday’s close, currently holding near the 1.1183 level. The pair tested support at last Friday’s 1.1161 low in Asian trading, but has since rebounded modestly. With the financial markets closed in both the US and UK today, trading is expected to be rather thin.
There were no high impact reports scheduled for release on today’s Eurozone calendar. However, European Central Bank President Mario Draghi will be speaking at 09:00 ET. He will deliver the introductory statement at the Quarterly Hearing before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels, Belgium.
Heading into this week, EUR/USD was in the midst of a consolidation phase which has been intact since the pair’s advance from the May 11th low stalled on May 22nd. The ensuing consolidation appears to represent a bull flag formation. Such a formation takes place following a protracted move to the upside, like that which occurred from the May reaction low. Following the advance, a narrow countertrend move develops, resembling a flag formation. By measuring the distance of the advance prior to the flag and projecting that distance from the upper boundary of the consolidation an upside target can be derived. A near term upside breakout from the flag would yield an upside target at approximately 1.1650.
First resistance for the pair is at the upper boundary of the consolidation/flag formation, near 1.1233, followed by the current rally peak at 1.1268. On a move above this level, the next target becomes the November 9th spike high at 1.1300, which was established at the time of the US Presidential election.
On the downside, first support is at the lower boundary of the flag formation, which currently comes in near the same level as the former high established November 4th at 1.1142. Holding this level would keep the bias in the pair firmly to the upside. Second support is at the upper boundary of the rising trend channel broken to the upside as a result of the May 16th advance. That trendline currently comes in near the 1.1072 level.
In tomorrow’s trading, at 05:00 ET, several data releases are on the Eurozone calendar, including May Consumer/Business Confidence for May. Then at 08:00 ET, German inflation data will be released.
In the US, Tuesday’s calendar includes Personal/Income Spending and PCE Prices at 08:30 ET.
The latest Commitment of Traders report, released last Friday, indicates that large speculators increased long holdings of euro futures by 10,798 contracts and decreased short holdings by 16,443 contracts. This leaves the total net position at 64,845 contracts on the long side. This represents the fifth week in a row sentiment regarding the euro has improved amid large speculators and is also their largest net long position since October 2013. It appears that large specs are anticipating an eventual scaling back of monetary stimulus by the ECB, a development that would be positive for the euro.
Source: EconomicCalendar
