Euro Seasonality Pointing Higher
- Posted by Alex
- on February 19th, 2013
The Euro is starting to look attractive again. Below is a 10 year seasonal chart. It means that for the year, we are statistically around the time that a low is put in the currency. What is interesting about the seasonality of the EUR/USD this year is that it bucked the trend (the seasonal average) and had a very strong January, which is typically supposed to be a weak period. When something does the opposite of a meaningful seasonal tendency, it is usually because there is a lot of commitment in the trend.
This pivot on the seasonal chart happens to line up with an area that we would expect an up move to materialize from on the chart of the spot EUR/USD. The purple box below highlights the uptrend line, 50 day moving average, and prior support and resistance.
The EUR/GBP looks even stronger, albeit more volatile with a bigger range.
All-in-all this looks like a good set up where the seasonality and trend are lining up. It is also an indication that European indices, which have been highly correlated to the Euro, could possibly shrug off the hard down moves they saw recently. Beyond this, it seems that there is a bit of a short term consensus that the ECB will attempt to devalue the currency, although they have yet to take any action towards that. If the pair can maintain a stable bid above 1.325 in the midst of bearish sentiment, new highs in the pair are likely.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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