Euro Bounce Sets Up $1.13 Level as Hurdle to Extending Rally

The euro’s rebound against the dollar has it sizing up a key hurdle.

The common currency rose for a sixth day against the dollar, its longest winning streak since 2013. Charts patterns signal the euro faces a challenge at its 100-day moving average of $1.1308 after it surpassed $1.10 Wednesday.

“Yesterday’s move above the key $1.1000 to $1.1050 zone represents a major breakout,” Matt Weller, an analyst at Gain Capital Holdings Inc.’s unit in Grand Rapids, Michigan, said in a note. “The 100-day moving average near $1.1300 may provide a near-term ceiling for the pair after the big rally this week.”

The currency pair hasn’t traded above its 100-day moving average since May 2014. It rose as much as 1.1 percent to $1.1249 per euro Thursday before paring gains in New York.

The immediate target is $1.1265 per euro, Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., said in a note. The currency pair’s price chart shows a “double bottom” pattern of lows in March and April which may lay the groundwork for more euro gains.

Market Focus

The focus for markets is shifting to resistance from $1.1267 to $1.1280, Niall O’Connor, a technical analyst at JPMorgan Chase & Co. in New York, said in a note. “This area includes the 38.2 percent retracement from the December high and the February breakdown area and will now define whether a deeper corrective phase can develop.”

The euro is poised to snap a nine-month losing streak in April. Euro-area consumer prices ended four months of declines and economic data pointed to a strengthening recovery, buoyed by the European Central Bank’s 1.1-trillion-euro ($1.2 trillion) bond-buying program.

The “insanely volatile” move in euro-dollar “has caught many market participants by surprise,” Boris Schlossberg, managing director of foreign-exchange strategy at BK Asset Management in New York, said in a note Thursday. “Traders who positioned themselves for an unambiguous dollar rally now find themselves well underwater and are reversing many of those trades, creating massive squeezes in euro-dollar.”

The common currency’s two-week implied volatility, a measure of future price swings, climbed to 13.2 percent, exceeding the average of 11.9 percent this year.

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