Thursday’s ETF Chart To Watch: CurrencyShares Euro Currency Trust (FXE)

by on September 6, 2012 | ETFs Mentioned:

Equity markets stalled and ultimately ended in shallow red territory for the day as eurozone jitters encouraged profit-taking ahead of today’s interest rate decision overseas. Alan Skrainka, CIO at Cornerstone Wealth Management, commented that the European Central Bank “is going to buy bonds in a big way; they are going to try to contain the crisis in Spain and Italy by buying their bonds.” Tensions could arise as many are expecting German lawmakers to suggest a number of limitations on the proposed bond-buying effort [see also ETF Tools Every Investor Needs].

As such, our ETF to watch for today is the Rydex CurrencyShares Euro Currency Trust (FXE, B-), which could see volatile trading following the ECB’s rate decision. Analysts are expecting that the ECB will cut the benchmark rate from 0.75% down to 0.50%, although the economic commentary issued after the decision itself will likely receive most of the attention throughout the day [see also Gold, Oil Hinge on ECB Meeting]. 

Chart Analysis

This euro ETF has been climbing higher along rising support (blue line) since hitting its most recent low at $119.73 a share on July 24, 2012. From a fundamental perspective, this rally has been running on hot air, so to speak, as lawmakers overseas have yet to agree upon a concrete, comprehensive approach that will ensure stability in the debt-burdened currency bloc. On the other hand, the technical picture is a bit more bullish; notice how above-average trading volumes kept FXE afloat yesterday, which is significant as this ETF has previously encountered serious headwinds right around $126 a share [see also 17 ETFs For Day Traders]. 

Click To Enlarge

Traders looking to make a quick return should be aware that the resistance level at $126 a share is quite significant; looking back, FXE has tried, and failed, to summit this level on June 20 and more recently again on June 29, 2012 [see also 5 Tips ETF Traders Must Know].


This ECB meeting should be a pivotal one as markets have high expectations for lawmakers to decide on a more aggressive approach. If investors are unhappy with the latest commentary and proposed efforts, FXE could be in for a very sour day; in terms of downside, this ETF has immediate support at $124 a share followed by the $122 level. On the other hand, optimistic sentiment can continue to carry this ETF higher; in terms of upside, FXE has major resistance at $126 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.