Euro Mixed Against Commodity Currencies


EURAUD – After closing above the 200 day SMA on 11/10 and holding above (on a closing basis) until 1/15, the EURAUD slipped below the closely watched moving average yesterday. Price is currently supported by the 10 day SMA at 1.6659 and the 10/27 high at 1.6639. The rally from 1.6432 to 1.6825 is more convincing than the choppy decline from 1.6825 to 1.6637. Additionally, price may be working higher to test a resisting line drawn off of the 6/6 and 10/4 highs near 1.7050. The 11/1 low at 1.6432 must hold in order for the bullish scenario to play out.

EURCAD – We mentioned last week that “price action at 1.4578 will either give way to a breakout to challenge the 8/26/2005 high at 1.4753 or a double top and reversal.” The break occurred and the EURCAD has extended to 1.4650. The next point of reference for this pair is the 11 month resistance line that began in January of this year. The line is at 1.4777 today and increases about 4 pips per day. Price above the 11/2 high at 1.4524 keeps the bullish structure intact. RSI is overbought at above 70 on the daily. The last occurrence of this was April 2006 when the pair approached 1.4360 before selling off to below 1.3900 a few days later. A break below 1.4524 shifts focus to the 11/3 low at 1.4330 as support.

EURNZD – The EURNZD rallied above the 4 month trendline drawn off of the 7/7 and 8/2 highs on 11/13 before consolidating and correcting lower. Also, an inverse head and shoulders inverse pattern may be forming but a break above the 10/2 high at 1.9529 (neckline) is required to complete the pattern. While the h&s pattern and trendline break are bullish, yesterday’s bearish engulfing pattern (daily) clouds the picture. Short term (hourly) RSI is increasing from below 30 which tilts the bias towards bulls at this point. Ideally, today’s low at 1.9195 holds in order to keep the bias cautiously bullish.