The Chart of the Week: EUR/USD over-populated positioning at critical weekly resistance

Analysts at TD Securities explained that we have seen significant increases in JPY, CHF, EUR, and AUD and a drop GBP. The following chart plots these levels in the 12m percentile context versus the gap from our tactical valuation models:

It shows AUD, SEK, NZD, and EUR are over-populated and expensive, while GBP, CAD, and NOK are cleaner. 

There have been a number of inputs into the euro's recent advance across the board, but in the main, it is a political rally.

There is growing speculation that the Republicans are on course to lose the White House. Meanwhile, we are seeing cohesion in the euro project between members nations.

Looking to the charts, measured to this week’s high, since the start of the month EUR/USD has rallied around 4%, as noted by analysts at Rabobank.

The size of this month’s trading range is not far short of that demonstrated in the whole of H2 last year. 

When looking at the move, we can see that the price made a double bottom and filled on the wick in an advance to new resistance structure:

Monthly chart

What we now need to know is whether this is a rally that has run out of steam and overstretched, and if so, where the shorting opportunity might arise. 

Conversely, if the bulls are not done yet, then where the next long opportunity might arise.

On the weekly chart, we can see from where the price too off from, stalling momentarily in its advance at structure looking left:

Weekly chart

In the daily chart, there are no signs of exhaustion:

However, price has run into a weekly resistance:

The 4 HR chart offers support structure on the way to two key final levels of support:

The daily chart, again, offers an interim target as being the 61.8% Fibonacci of the current impulse:

On a medium-term view, Analysts at Rabobank have revised their EUR/USD forecasts higher and now see EUR/USD trading in the 1.15/1.16 area on a 1 and 3-month view.

On the anticipation that risk appetite will be reeled in in the coming months and that the USD will remain a primary safe haven, we see a dip lower towards the 1.12 area on a 6-month view.