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Technical Analysis of EUR/USD

The Euro had been in negative mood against the greenback following Wednesday’s 29th February sharp sell-off, with the EUR/USD breaking out of consolidation this morning and edging higher ahead of two major events that are expected to open a good deal of renewed volatility. Activity has already picked up ahead of the ECB rate decision. The rate benchmark is widely expected to remain unchanged at its low level of 1.00% and taking into consideration the recent second round of LTRO, there are no signs that there could be a third tranche any time soon. The key driver of the market for the day, however, remains the Greek debt-swap. It looks like investors had recently factored in the risk of the worst case scenario. Even though the indications up to today have been of limited PSI, the creditors of Greece would prefer a write down of their assets in exchange for other interest bearing bonds rather as opposed to losing the whole lot, making a Greek default highly unlikely. From a technical point of view, the bullish alignment of the 20 EMA and the 50 EMA on both the hourly and the daily chart are generating buy signals for the single currency. With a bullish line capping RSI since 3rd March and the MACD flipping over zero on the hourly chart, the bulls seem to be taking the control of the market.. Taking into consideration that the current rally of the US Dollar Index has been put on ice on the back of the upcoming fundamentals, with the US Dollar losing ground against all of its counterparts, with the exception of the yen, the EUR/USD could reach as high as 1.3334, the 38,2% Fibonacci level from August’s high to January’s low, with key level on the downside to watch at 1.3071 (the 23.6% Fibonacci level).
EUR/USD Daily Chart

EUR/USD Hourly Chart

Dafni Serdari
Market Analyst
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