Wednesday’s ETF Chart To Watch: FXE Struggling At Support Ahead Of Eurozone GDP

by on May 15, 2013 | ETFs Mentioned:

The bulls returned to Wall Street with full force on Tuesday as a relatively quiet data front left the doors open and investors bolstered major U.S. equity indexes further into uncharted territory. Upbeat small business confidence data on the day added fuel to the rally; the NFIB small business optimism index rose to 92.1 in April, marking a healthy improvement over last month’s reading of 89.5 [see also The Cheapest ETF For Every Investment Objective].

Our ETF to watch for the day is the CurrencyShares Euro Currency Trust (FXE, A) which could see volatile trading as investors adjust their positions in the currency market following the release of the latest eurozone GDP data. Analysts are expecting for the currency bloc’s economic growth rate to come in at a negative 0.9%.

Chart Analysis

Consider FXE’s one-year daily performance chart below. Since breaking below its upward trend (blue line) in late February of this year, FXE has struggled to regain bullish momentum and resume its uptrend that began in July of 2012 when shares bottomed out at just below the $120 level. Over the past two months FXE has drifted sideways and it appears to have also staged three failed attempts at settling past $131 a share; notice how this ETF failed to summit this resistance level (red line) on 4/16, 5/1 and most recently on 5/8/2013 [see How To Swing Trade ETFs].

Click to Enlarge

Conservative investors looking to jump in long should consider waiting, as FXE is currently hoovering right around its 200-day moving average (yellow line), which means that a breakout in either direction is possible [see also Euro Free Europe ETFdb Portfolio].

Outlook

Upbeat GDP results from the debt-burdened currency bloc can surely inspire a rally for the euro; in terms of upside, FXE has major resistance right around $131 a share. On the other hand, dismal economic growth prospects can sink FXE; in terms of downside, this ETF has major support around $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.