The unloved euro ETF is facing a critical multiyear support line and some technical analysts are upbeat on the currency due to bullish price patterns and bearish sentiment extremes.
For CurrencyShares Euro Trust (NYSEArca: FXE), $120 a share seems to be a key battleground area where bulls could make a stand.
From a technical perspective, Chris Kimble at Kimble Charting Solutions sees a bullish “falling wedge” pattern in the euro that could trigger a rally.
He also notes sentiment on the euro is currently very low at only 25% bulls.
“For the last few weeks we’ve been talking about the potential for the euro to get decent rally going from down here. But we’re still waiting to see a confirmed breakout above some key levels. The good news is that we keep testing, and the more tests of resistance, the better our chances,” adds J.C. Parets at All Star Charts.
“One of the catalysts that can take the euro a lot higher would be a big sell-off in the U.S. Dollar Index. Among other reasons to be cautious here in the dollar is the unsustainable amount of bulls out there in this space,” he added.
The euro ETF fell Thursday after the European Central Bank and ECB President Mario Draghi disappointed investors who were looking for more stimulus.
“People were expecting coordinated measures to ease conditions in Europe, and it was largely a disappointment,” said Aroop Chatterjee, chief foreign-exchange quantitative strategist at Barclays, in a Dow Jones Newswires report. “It showed how the ECB isn’t going to do anything until governments get their acts together.”
FXE is down about 8% for the trailing three months on Eurozone debt worries. Conversely, PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP) is up about 5%.
CurrencyShares Euro Trust
Chart source: MarketWatch
Euro
Chart source: Kimble Charting Solutions