EURO – Drying up of demand?

EURAUD and EURJPY, H1

Eurozone trade surplus narrows as exports drop. The Eurozone posted a sa trade surplus of EUR 19.0 bln in October, down from EUR 24.5 bln in the previous month, as exports dropped back to EUR 180.6 bln from EUR 185.0 bln, while nominal imports picked up. The nominal data, impacted by developments in energy prices and exchange rate developments, and these are still healthy surpluses and less of a sign that growth is slowing down, but that the recovery is broadly balanced and not reliant on trade, as especially German recoveries tend to be in the past.

The EUR perked up after the data, with EURAUD up by 51 pips and EURJPY at 132.44 high after 132.04 bottom in the morning. Mostly weaker stock markets in the Asia-Pacific region today, and a mixed-to-lower tone across European bourses so far, along with a solid reading from the latest quarterly Tankan survey of business confidence in Japan, which showed the best quarter for Japanese manufacturers since 2006, are factors that have been conducive for yen strength. While Aussie on the other hand has been the gainer of the week, since it has rallied for 4 consecutive days, especially after the strong November Employment report out of Australia.

In the Bigger picture, both EUR crosses continue being week despite the intra-day positive momentum seen after the data. The EURJPY in long-term suggested further weakness, since it is traded below 20 and  50-Day MA, after the strong bearish closing yesterday around month’s lows at  132.36.  The Stochastics are moving lower at 33, while MACD and RSI are neutral. In london open, the pair gained some ground against overnights losses by breaking the 20-period MA in the hourly chart. However only a break and a hold above the short-term resistance at recent swing high, at 132.54, could suggests buying opportunity and a possible retest of 50 and 200-period EMA at 132.80 – 133.10 area. Otherwisea weakness of the pair to break this area, but most presicely a break below  132.15, would coincides with the bigger picture of the pair and will triggered another short position with target at 131.50.

The EURAUD, presents a similar behaviour with EURJPY, due to Aussie’s strength. Pair’s Bollinger Bands are extending their pattern, while the pair is moving near a key support area, marked at 1.5330 , which encompasses the 61.8 Fibonacci level and the 50-DAY MA.  Therefore, this cis a critical level, since 61.8 Fibonacci level consider being a retracement level for assets. A break below the 61.8 Fibonacci level seen since November, could suggested a sell opportunity in the long-term and a possible retest of the S2 level based on pivot point analysis at 1.5232. 

Meanwhile, a hold above 61.8 Fib level and a Break of the 1.5410, which is a confluence of 50.0 Fibonacci level and the current Pivot Point level, suggests an upwards momentum, with resistance at 1.5470.

The weak performance in Europe, however, followed broad losses in Asia overnight, with concerns about the U.S. tax bill underpinning the drying up of demand ahead of the holiday period.