Summary:
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EURUSD falls to 7-week low
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Near 500 pip decline in last few weeks
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Signs of a bounce but recovery remains tentative
The rise in US yields to their highest level in several years has caused a resurgence in the US dollar in the past few weeks and the other main theme in the markets at present, namely political instability in Italy, has weighed on the Euro. Taken together it shouldn’t be too surprising that this is negative for the EURUSD, but after the world’s most popular pair hit its lowest level in more than 7 weeks today, there is some suggestion that the selling could be overdone. From a fundamental point of view, the recent news flow has been near constantly negative for this market and as such contrarian traders may be asking how many times the market can discount the same bad news.
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The EURUSD fell below 1.1460 earlier, but has since moved back above the level. Not that the RSI didn’t support the break lower and there is the potential now that this move down was false. Source: xStation
Of the last 10 full trading sessions (not counting Sundays) for the EURSD the pair has only managed to to end higher in 2 of them. The cross had appeared to find some support around the 1.1460 level with buyers defending it on several occasions, but price broke below there earlier on today. This move is starting to look like a possible false break and how today’s candle closes could prove pivotal going forward. If the day can end back above 1.1460 then the seeds of recovery may have been sowed, but a close below there would pave the way for further downside towards the 1.13 handle.
Longer term the market has been drifting lower in recent weeks and a failure to find support around recent lows will open the door for a larger decline towards the 1.13 level. Source: xStation
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