Saturday, 29 June 2013

EURUSD ideas

The EUR has dropped 3% vs the USD since the FOMC announcement and there is very little fundamentally for this direction to change, however, this being said there does appear to be some areas that pose good areas for support.

Below shows an hourly EURUSD chart overlayed with triple SMA (50,100,200) and then 1Yr EUR swaps overlayed. On top of this there are a variety of Fibonacci levels and Stochastics and RSI.

EUR vs Swaps
As we can see during the last trading week the swaps and the EUR have diverged to create a short term undervaluation for the EUR (Swap implied fair value - 1.33) Also at 1.3001 and 1.2973 there are longer term fib levels which on top of the Psychological level should act as support.

Stochastics and RSI are both oversold and due a pull-back, and when considering the double bottom price action we could see a bounce back towards the swap value.

While there are significant headwinds over the coming week such as various unemployment data (NFP, ADP, claims etc.), PMI's and ECB press conferences.

Furthermore, as seen here the German-US 2 year spread has been tracking very nicely but during Friday's session there was a small divergence.

For this reason I got long EURUSD at 1.3000, with a protective stop under 1.2950 and a target at around 1.3150-1.32

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