Euro eyes bids below 1.4000

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• Euro eyes bids below 1.4000
• Oil collapses toward 60.00

EUR/USD

Euro longs once again tested the bids around the 1.4200 figure, a level marked by the multiple intraday pivot lows set during the consolidation that took place during the second half of August. A further move to the downside would most likely see the pair test support at 1.4159, a level defended by the 50-day SMA with sustained downside momentum seeing dollar bulls challenging bids around 1.4046, a confluence of the August monthly pivot low and upward sloping trendline that dominated the price action since March. A confirmed break to the downside will most likely see single currency bulls retreat below the psychologically important 1.4000 handle, a level marked by the 23.6 Fib of the 1.2457-1.4458 euro rally and test support around 1.3736-1.3756 zone, a confluence of trading range’s lower boundary and March monthly pivot high. Indicators are neutral with 20-day SMA beginning to slope downward toward 50-day SMA with 200-day SMA providing a long-term support at 1.3551. Stochastic has undergone a bearish crossover below overbought line at 66.55 with MACD bearish crossover issuing a sell signal above the zero line.

NYMEX October Crude Oil (CL V9)

Oil remained well offered as the contract began to slide below recent consolidation lows at 67.42, an August monthly pivot low. As crude continue to tumble lower and break support around 66.35, the upward sloping channels lower boundary that dominated the price action since February, a sustained momentum to the downside will likely see the oil futures test bids around the psychologically important 65.00 handle, a level marked by the July 29 intraday pivot low. A confirmed break lower will most likely see the contact test support at 63.69, a level defended by the key 38.2 Fib of the 44.87-75.32 Oil rally. Indicators are bearish with 20-day SMA sloping downward toward 50-day SMA with 200-day SMA providing a long term support at 60.72. Stochastic is about to cross below 50 neutral line with bearish MACD about to cross below the zero line thus reaffirming an overall bearish move in oil.

Options traders should note a large option positions seen along 50 through 70 strikes in October puts with over 74.5K contracts outstanding, with over 66.5K call option contracts spread through 70 to 100 strikes. Given skewed option positioning market toward puts traders should be aware that market believes that oil price will decline below 65.00.

Published on Wed, Sep 2 2009, 15:27 GMT