The Fall of Euro? Fundamental/Technical/Sentimental Analysis

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The Fall of Euro? Fundamental/Technical/Sentimental Analysis

Fundamental Analysis: The European 17-nation currency, euro, fell close to a recent three-month low versus the dollar on Wednesday as worries of political turmoil in Greece and the fragility of Spain’s banking sector clouds the euro zone. Greek politicians are struggling to form a new government, fueling concern the nation will leave Europe’s currency union. Spain’s 10-year bond yields climbed back above 6 percent. These may drag the euro further down.

Technical Analysis:

EURUSD broke below a support level of 1.3000 and has been trading bearish below the Ichimoku cloud on a daily basis. The pair seems to have formed a “triple top” since January after its brief upward movement. A triple top is a reversal pattern and indicates the pair may move down back to the lows of January 16th, at 1.2621.

Zooming in to the 4-hour chart, the pair is trading well below the Ichimoku cloud with the Tenkan line on a down trend and the Kijun line flattening. This may indicate that on a short term basis, you may want to wait for a close below 1.2930 before getting aggressively bearish on the pair. At this point, only a rally above the previous support of 1.3000 would delay the bearish outlook on euro / dollar.

Sentimental Analysis: According to the SSI (Speculative Sentiment Index), the ratio of long to short positions in the EURUSD stands at -1.06 as nearly 51% of traders are short. Yesterday, the ratio was at -1.44 as 59% of open positions were short. In detail, long positions are 15.9% higher than yesterday and 36.6% stronger since last week. Short positions are 14.9% lower than yesterday and 28.7% weaker since last week. Open interest is 2.3% weaker than yesterday and 0.8% below its monthly average. The SSI is a contrarian indicator and the sharp shift towards EURUSD buying gives us pause on a previously bullish bias.

By Kiana Danial at Forex Diva