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

by on July 5, 2012 | ETFs Mentioned:

Equity markets rose higher on Tuesday, ending the first half of the week ahead of Independence Day on a positive note. Investors cheered on better-than-expected factory orders data, helping to restore some confidence following the disappointing ISM results from earlier in the week; the figure came in at 0.7%, sailing past estimates of 0.1% as well as last month’s reading of negative 0.7%. Gold and oil traded higher ahead of the holiday break as well; futures prices for these commodities settled around $1,620 an ounce and $87.50 a barrel respectively [see also Euro Free Europe ETFdb Portfolio].

Investors will re-focus their attention on the Euro zone later today as the European Central Bank issues its rate decision. As such, the Rydex CurrencyShares Euro Currency Trust (FXE) could see a surge in trading volumes as trading resumes on Wall Street; analysts are expecting for the ECB to cut interest rates from 1.00% down to 0.75% [see also At Long Last: An ETF To Bet Against The Euro].

Chart Analysis

FXE appears to be regaining support back above the $124 level, although it may soon encounter selling pressures as it flirts with resistance around $126 a share. Notice how FXE recently sank as low as $122.75 a share on 5/31/2012 only to bounce back higher and encounter profit taking at $126 a share the following weeks. If this ETF fails to summit the $126 level this time around, shares of FXE may find themselves stuck in a range once again; notice how FXE oscillated between the $130 and $132/$134 levels from the beginning of February until May earlier this year [see also 3 ETF Trading Tips You Are Missing].

Click To Enlarge

Despite looming debt drama in the Euro zone, this euro ETF has considerable upside from a longer-term perspective and makes for an appealing buy for those with a stomach for risk; FXE has considerable support around $125 a share seeing as how it debuted just below this price level back in December of 2005 [see also ETF Technical Trading FAQ].


If the ECB cuts rates as expected and issues an optimistic outlook, the euro may be in for a positive day. In terms upside, the first resistance level for FXE comes in at $126 a share followed by $128 a share. On the other hand, a dismal reaction to the latest ECB meeting could sink the euro lower. In terms of downside, FXE has support at $124 a share, while a break below $122.75 a share would be worrisome. 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.