The Forex Trading Week Ahead
Kathleen Brooks and Eric Villoria of Forex.com highlight the events and indicators likely to shape the forex markets this week.
Can EUR/USD Stay Above 1.30?
EUR/USD closed the weekly London session above 1.30 on Friday for the first time since mid-October. This is a very bullish development for this cross, however, the question to ask now is can the euro extend these gains into the end of the year?
To answer this we need to look at both the technical and fundamental factors impacting the single currency. From a technical perspective the bulls are still in control. EUR/USD broke above the top of the daily Ichimoku cloud last week, which is the start of a technical uptrend, added to that it also broke above the base of the weekly cloud at 1.2840 early last week. This suggests that the longer term downtrend may be coming to an end. The market is still net short EUR according to the latest CFTC data. However, after reaching record levels, the number of short contracts has been cut dramatically since June 2012—just before ECB President Draghi said that he would do everything possible within his mandate to protect the single currency.
So from a technical perspective there is room for further upside, and momentum indicators don’t suggest that the euro is currently overbought in the short term.