EUR/USD: Resistance Level At 1.38 Fends Off Again

 | Dec 19, 2013 12:48AM ET

EUR/USD for Thursday, December 19, 2013

After placing some pressure on the resistance level at 1.38, the Euro has since fallen sharply down to its lowest level in two weeks moving back through 1.37. It had enjoyed a solid move higher over the last couple of weeks before easing back to finish out last week. This move higher saw it return to a wall of resistance at 1.38 and in doing so move to a six week high. In the last few days the Euro has challenged the 1.38 resistance level again before being turned away yet again. A couple of weeks ago it moved very well away from the key 1.3550 level and back to 1.38. To finish out the week a few weeks ago the Euro settled right around the 1.36 level after earlier in that week moving up strongly through the resistance at 1.3550. In the week prior the Euro did well to bounce strongly off support at 1.34 and recover the lost ground from the previous couple of days which saw it fall from the resistance level around 1.3550. This was after a few weeks which saw it move steadily higher from a support level at 1.33 back up to a three week high just above 1.3550. Over the last month or so 1.3550 has been a key level. Towards the end of October the Euro enjoyed a strong surge higher to move through to its highest level in nearly two years just above 1.38 before spending that week content to consolidate around this level. Over the following three weeks it fell heavily down to a support level at 1.33 before recovering well over the last few weeks. It moved quite well throughout the middle of October after breaking higher from its sideways range. For the month leading up to that, the Euro traded within a narrow range between 1.3450 and 1.3650 before the range narrowed down to between 1.35 and 1.36. The former level of 1.35 was strongly tested a few weeks ago and has resurfaced as a significant level presently.

Throughout August the 1.34 level had been causing the Euro headaches however several weeks ago it surged higher and moved through there to its then highest level since February just shy of 1.3570, which was past a couple of weeks ago moving to just shy of 1.3650. About a month ago the Euro fell strongly away from the resistance level at 1.34 back to below the support level at 1.32 and in doing so traded to its lowest level in seven weeks very close to 1.31. Looking at the bigger picture the Euro spent a lot of August and September trading within a range between 1.32 and 1.34 before recently pushing its range to between 1.3450 and 1.3650. Back in early July the Euro was content to maintain the level above 1.31 and settle there, as it received solid support from both 1.30 and 1.31. On a couple of occasions it made an attempt to move within reach of the longer term resistance level at 1.32 and finally it finds itself trading on the other side of this level and being well established there.

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Throughout May and most of June the Euro surged higher to a four month high above 1.34. Before that in the first half of May, the Euro fell considerably from near 1.32 down to six week lows near 1.28. Back at the beginning of April the Euro received solid support around 1.28 and this level was called upon to provide additional support. Throughout this year the Euro has moved very strongly in both directions. Throughout February and March the Euro fell sharply from around 1.37 down to its lowest level since the middle of November around 1.2750. Sentiment has completely changed with the Euro over the last few weeks and the last couple of months has seen a rollercoaster ride for the Euro as it continued to move strongly towards 1.34 before falling very sharply to below 1.29 and setting a 6 week low.

In the first speech of her third term, German Chancellor Angela Merkel urged European partners to tackle flaws in their currency union by ceding control over economic policy and making politically sensitive changes to the bloc's treaty. Speaking in the Bundestag lower house of parliament a day after her new "grand coalition" government was sworn in, Merkel said progress in countries like Ireland and Spain showed Europe was overcoming the financial crisis that nearly tore it apart. But she said it was too early to declare victory, describing the 17-member bloc that shares the euro currency as an unfinished project that could not afford to rest on its laurels. "I know that pushing through treaty changes in the member states can be difficult, but if you want more Europe, you have to be prepared to develop it further," Merkel said. "In a world that is constantly changing, we can't stand there and say that at some point we agreed the Lisbon Treaty and there's no need to change it again. This won't work."