Eur/usd - page 508
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Dollar Strength Pushes EUR/USD to Lowest Levels Since Late 2015
EUR/USD’s rally earlier in today’s session proved unsustainable as the dollar surged to new highs, resulting in a sharp move lower in EUR/USD. The breakdown in the pair has confirmed a solid drop below support at the low established in early January at 1.0710, as the pair is currently trading at 1.0626, the lowest level since December 2015.
The dollar moved sharply higher after strong US economic data and comments from Federal Reserve Chair Janet Yellen, who was testifying on the economic outlook before the congressional Joint Economic Committee. She said the central bank could raise interest rates “relatively soon,” according to a report from Reuters.
Regarding the economic data, CPI increased 0.4% in October, as expected. The annual inflation rate was at 1.6%, from 1.2% previously. This increase was in line with market expectations and is the highest annual inflation rate since October 2014. The data will maintain expectations of a December Fed rate hike. In addition, October housing starts surged 25.5% to a seasonally adjusted annual rate of 1.323 million, while building permits rose 0.3% to a seasonally adjusted annual rate of 1.229 million, both above consensus.
These factors combined to send the dollar as high as 101.01, its best level since April 2013. In turn, EUR/USD plummeted. The downside target for the pair is now at the next-lower support at the November 2015 low at 1.05237. With no major economic reports on calendar tomorrow, the dollar is expected to maintain a firm tone heading into the weekend. In Germany, October PPI is set for release and is expected to grow 0.2% MoM, from a 0.2% fall in September.
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Yesterday the EURUSD tried to rally but found enough resistance to turn around and closed near the low of the day, in addition the pair managed to close below the previous day low, which suggests a strong bearish momentum.
The pair is trading well below the 10, 50 and the 200-day moving average that should act as dynamic resistances.
The key levels to watch are: the 10-day moving average at 1.0834 (resistance), a daily resistance at 1.0819 (resistance), a Fibonacci extension at 1.0666 (resistance) and a daily support at 1.0622 and the all-time low at 1.0462.
The EUR/USD continues to slide downwards as Yellen’s comments and the positive macro data from USA supported the dollar’s strength. The pair remains under the sloping to downwards moving averages with RSI at negative territory. The intraday resistances are placed at 1.0660, 1.0820 and higher at 1.0945. Support is seen at 1.0580, 1.0520 and 1.0460.
Eurozone current account September SA EUR +25.3bln vs +29.1bln prev
Eurozone Sept current account report 18 Nov
EUR/USD: A Double Blow: Finally Heading To Test Parity
USD: US dollar bull market regains upward momentum.
The US dollar rally has accelerated after the dollar index clearly broke above key resistance yesterday from the previous cyclical high at around 101.5 recorded in December of last year. It brings an end to the period of consolidation which has been in place since March of last year.
We would not be surprised to see at least another 5 to 10% upside for the US dollar heading into the middle of next year as the bull market has embarked on the another leg higher. In the first and second stages of the US dollar’s advance, the dollar index increased by around 14% between September 2011 and July 2012, and by around 25% between July 2014 and March 2015. One potential constraint which could help to dampen further upside is that the US dollar is already very overvalued according to our longterm valuation model estimates.
EUR: greater focus on political developments in Europe
The election of President Trump has delivered a double blow to the EUR/USD rate sending it on the way towards a test of parity. Further evidence of a rise in antiestablishment sentiment amongst the US public has heightened concerns over political risk in Europe in the year ahead. The upcoming constitutional referendum in Italy is very much in the market’s focus now. The global bond sell off is reinforcing the sell-off in the Italian government bond market ahead of the referendum. The yield spread between the 10-year Italian and German government bonds has widened sharply by around 0.6 percent since the summer to just over 1.8% reaching its widest level since May 2014.
EUR/USD forecast for the week of November 21
The EUR/USD pair had a strong negative candle printed for the week, and with that being the case I think we are testing the 1.05 level almost immediately. If we break down below there, the Euro will very easily reach the parity level over the next several weeks. I have no interest in buying this pair, and I think any bounce that show signs of exhaustion could be a nice selling opportunity going forward. It would not surprise me at all to break down, but we may need to attempt doing so several times.