Euro Stuck In Tight Range, Aussie Closes Down And Levels to Watch for Next Week 20 August 2012
The EUR/USD pair spent last week trading in a tight 129 pips range, moving back and forth between a low of 1.2255 and a high of 1.2384. Just to give a perspective of how small of a range this is, its 2 times smaller then the average range of the past 14 weeks which currently stands at 259 pips (this number includes this week in the calculation).
There were several important news released during the week: German ZEW, U.S. Retail Sales, U.S. PPI and CPI data and U.S. Consumer Sentiment. But they all failed to make a lasting impact on the Euro, the pair would swing up one day and down the next. EUR/USD closed the week at 1.2332, up only 43 pips on the week. See chart below for this week's price action and the levels to watch for next week.
To the upside, the 1.24 will provide resistance followed by 1.2450. If those levels break, next levels in line are 1.2550 followed by the 1.27 – 1.2750 area, this area was a swing high in the Euro in June of this year. To the downside, the 1.2234 – 1.2250 area will provide support, followed by 1.2161. If that level breaks, we're looking at the swing low at 1.2041 for support. This level was the low made in the Euro's most recent downtrend which ended in late July. Next in line after that is the psychologically important 1.20 level. If that level breaks, next support is seen at 1.1875, a low that the EUR/USD made back in June 2010.
AUD/USD closes down 136 pips on the week
AUD/USD was one of the losers this past week, the pair closed the week at 1.0417, down 136 pips from the week's open at 1.0553. If you add in the gap down during last weekend, then the Aussie lost 157 pips total on a week to week closing basis. There were no major news reports out for the Australian currency this week and we already mentioned the major U.S. data above when talking about the Euro.
News of some significance for the Australian economy includes the Business Confidence data, New Motor Vehicle Sales, Westpac Consumer Sentiment and Inflation Expectations. Inflation expectations came in at 2.4% versus a previous reading of 3.3% but the rest of the data was Aussie positive. In short it appears that the major mover for AUD/USD this week didn't come from the news releases.
Levels to watch on the downside include the 1.0328 level, followed by the 1.02 – 1.0225 area which provided both support as well as resistance in the past. A break of this area may extend the AUD/USD move downward to 1.01, a low the AUD/USD made on July 12. And below that level lies the psychologically important 1.00 level. To the upside, the 1.0450 – 1.0473 area we just broke down from will provide some resistance, followed by the 1.0550 level, then by 1.06, a swing high the Aussie made few days ago. In the unlikely event we brake further up, levels to watch beyond the 1.06 level include 1.0750 and 1.0850. The 1.0850 level is this year's high for the AUD/USD, made back in February. See chart below for these levels.