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On the last Friday’s session the EURUSD fell again but this time with a narrow range and closed near the low of the day, also managed to close below Thursday’s 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: a daily resistance at 1.0819 (resistance), the 10-day moving average at 1.0787 (resistance), a Fibonacci extension at 1.0666 (resistance) and a daily resistance at 1.0622 and the all-time low at 1.0462.
EUR/USD Higher in Today’s Trading
EUR/USD is starting off this week’s trading with a rebound, as the pair is currently trading at 1.0631, up 0.42% over Friday’s close. This is following a steady move to the downside over ten days which drove the pair as low as 1.05693.
First resistance for EUR/USD is at the recently broken support at the January 2016 low at 1.0710 level. Failing to move above this former support on a rebound would underscore the pair’s weakness and keep the door open for a near term breakdown below the December 2015 corrective bottom at 1.05237. Not far below this level is the major corrective bottom established in March 2015 at the 1.04590/1.04625 level. A drop below this key zone of support would confirm a breakdown from a long term trading range, calling for further losses in the months ahead.
Given the persistent weakness in the pair over the past two weeks and resulting extreme oversold condition, a period of consolidation or rebound is warranted. However, signs of hesitation in the pair on an approach of 1.0700 would suggest this area will be able to cap the advance and warrant new selling in anticipation of a resumption of the broader bearish trend.
Recent weakness in EUR/USD has been driven by strength in the dollar, which has risen to a 13+-year high over expectations of an interest rate increase at the December 13-14 FOMC meeting. At present, fed fund futures are pricing in a 95.4% probability of an interest rate increase at the December FOMC meeting, up from 90.6% last Thursday and 85.8% at the start of last week.
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EUR/USD In Search of Support
The EUR/USD is trying to post its first positive day since November 4th, currently higher by 0.14% to $1.0602. The pair has been sold aggressively since Donald Trump surprisingly won the US presidential election. The unexpected victory gave the US Dollar a strong boost to 13+ year highs. The EUR/USD is approximately 60 pips away from the December 3rd low at $1.0517 where it bottomed when the ECB disappointed the market and 130 pips away from its worst levels since 2003 at $1.0469.
The pair is at risk of a bounce soon given how oversold it is near major levels. The Relative Strength Index (RSI) is at an extremely oversold reading of 23. The EUR/USD is also extremely stretched from its 20-day moving average, currently at $1.0886. However, without a major fundamental catalyst bounces are likely to be short-lived and sold by holders of losing long positions and eager shorts looking for a break below the 2015 lows towards parity.
It would be surprising if the Euro could rally above the October low of $1.0850. If the pair bounces above this resistance level, then a larger rebound could be developing. As long as it doesn’t bounce above the October low, rallies are likely to lose steam and turn lower.
In today’s news, ECB President Mario Draghi provided no hints towards what to expect at the December meeting, maintaining recent commentary. Looking ahead to the rest of the week, there isn’t any major news events on the calendar out of the Eurozone. Markit’s manufacturing and services data may have an impact on Wednesday morning along with U.S. Durable Goods Orders later in the day. On Thursday, Germany will report Q3 GDP and IFO will release its German sentiment figures.
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The euro marked slight increase against the dollar on Monday. The short-term expectations remain in favor of the US dollar, with breaking the support at 1.0519, that could confirm another leg downwards. Next support is located at 1.0452. First resistance is seen at 1.0818, and second at 1.0925.
Yesterday the EURUSD rose with a narrow range and closed near the high of the day, although the pair closed within Friday’s range, which suggests being slightly on the bullish side of neutral.
The pair continues to trade well below the 10, 50 and the 200-day moving average that should act as dynamic resistances.
The key levels to watch are: a daily resistance at 1.0819 (resistance), the 10-day moving average at 1.0717(resistance), a Fibonacci extension at 1.0666 (resistance) and a daily resistance at 1.0622 and the all-time low at 1.0462.
Yesterday the EURUSD went back and forward without any clear direction but closed in the red, in the middle of the daily range, in addition managed the pair managed to close within previous day range, which suggests being clearly neutral, neither side is showing control.
The pair continues to trade well below the 10, 50 and the 200-day moving average that should act as dynamic resistances.
The key levels to watch are: a daily resistance at 1.0819 (resistance), the 10-day moving average at 1.0691(resistance), a Fibonacci extension at 1.0666 (resistance) and a daily support at 1.0622 and the all-time low at 1.0462 (support).
EUR/USD Consolidates Following PMI Data
EUR/USD ended Tuesday’s session little changed following Monday’s rebound and the pair has failed to make any upside progress in today’s session following the release of PMI data. EUR/USD is currently trading at 1.0622, down 0.02% from Tuesday’s North American close.
The German flash PMI services-sector index continued to recover for November with an increase to a six-month high of 55.0 from 54.2 in October. This was the strongest reading for six months and above consensus expectations of 54.2. In contrast, the manufacturing index declined to a 2-month low of 54.4 from 55.0 and was slightly lower than the consensus forecast of 54.8. The overall composite index was, therefore, slightly lower than expected 54.9 from 55.1, although still close to 10-month highs.
The November Eurozone flash Markit PMI reading for the manufacturing sector strengthened to a 37-month high of 53.7 from 53.5 and was above consensus expectations of a slight decline to 53.3. The services-sector index also strengthened significantly to 54.1 from 52.8, which was the highest reading for 11 months and also well above consensus forecasts of 53.2. The overall composite output index was, therefore, able to strengthen to 54.1 from 53.3, also the strongest reading for 11 months.
EUR/USD is essentially flat following the data. Give the recent price action, it appears the pair will merely consolidate in reaction to the current extreme oversold condition. Thus, a near term break to new reaction lows cannot be ruled out.
The current low in EUR/USD represents a test of key support at the December 2015 corrective bottom at 1.05237. And, not far below this level is the major corrective bottom established in March 2015 at the 1.04590/1.04625 level. A drop below this key zone of support would confirm a breakdown from a long term trading range, as can be seen on the monthly chart. Such a development would call for further losses in EUR/USD the months ahead.
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