ICmarkets

Our take on the Christmas week for the EUR...

FX:EURUSD   Euro Fx/U.S. Dollar
270 0 2
Following two weeks of buying from deep within a weekly range demand at 1.0519-1.0798, the single currency changed tracks last week. As a result of this, all gains accrued the week prior were erased and price was sent back down to the top-side of the above said demand into the close 1.0865. We doubt there will be much movement on the weekly timeframe this week due to most traders winding down for the festive period. With that being said though, low liquidity does not always mean less movement. Therefore, upside targets fall in at range supply coming in at 1.1532-1.1278, whilst a break below demand would see price enter into the jaws of another demand drawn from 1.0333-1.0502.

On the other side of the field, daily action shows that other than the indecision candle printed on Monday, and the rebound from the swap support level at 1.0813 on Friday, the EUR was painted red! However, if the buyers continue to defend the 1.0813 hurdle this week, then we see a clear run on this timeframe up to a minor, but quite obvious, swap resistance level at 1.0936. A violation of 1.0813 on the other hand places the swap support level at 1.0725 (converges with a 61.8% Fibonacci level) in the limelight.

A quick look at Friday’s activity reveals that with the help of the current daily swap (support) barrier, psychological support 1.0800 held steady, forcing price to close above mid-level resistance 1.0850 by the week’s end. Although the close was strong, there’s trouble lurking directly above in the form of not only a swap supply zone at 1.0879-1.0899, but also psychological resistance placed at 1.0900.

Given that today’s fundamental docket is relatively light, we are not expecting much action. Considering the position of price on the higher timeframe picture (see above) though, we may see further buying take form during the week. From this, we’d expect the above said H4 swap supply/psychological resistance to be engulfed, and price touch gloves with the H4 swap resistance level at 1.0936 (seen on the daily chart too), and at a push, the large psychological resistance 1.1000 (sits just below daily supply at 1.1072-1.1013).

However, should price retest 1.0800 again, we’d also be interested in looking to buy here due to the clear relationship this number has with the higher timeframe supports (see above). In the event that this level gives way and our above analysis is incorrect, then there’s little to stop price from connecting with 1.0725 – the daily swap (support) barrier mentioned above.
With the above in mind, here’s a list of the levels we’re going to be eyeing this week:

Sells:

• The swap resistance level at 1.0936 (confirmation required).
• Large psychological resistance 1.1000 (confirmation required).
• Break below 1.0800 with a confirmed retest would allow us to short (with a smaller-than-usual position) down to 1.0725 – a daily swap (support) level mentioned above. The reason for a smaller than usual position is simply because even though liquidity will likely be lighter than usual, this does not always mean prices will lie idle.

As for buys:

• Psychological support 1.0800 (confirmation required).
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