The EUR/USD pair fell below 1.11 handle on account of the flight to risk assets, triggered primarily by the uptick in the oil prices. A slowdown in the manufacturing activity across Eurozone and in Germany as shown by preliminary PMI readings failed to have any impact on the pair. This has been the case on most occasions ever since the ECB moved to negative rates (EUR became funding currency).
_20160222093823.png "EURUSD daily")
Focus on oil
The common currency remains at the mercy of the oil price gyrations and the resulting impact on the risk assets. Brent futures are having a tough time extending gains above 50-DMA of $33.84 despite the drop in the US rig count. Markets are not too optimistic about the possibility of Iran cutting its produce. Hence, the odds of a bearish move in oil cannot be ruled out. Hence, EUR bulls could attempt a comeback if oil drops and equities erase gains.Technicals – Eyes 1.1140 above 50% Fibo level
- Euro’s dip below 1.1088 (50% of Mar low-Aug high) on Thursday and Friday along with a positive close on Friday at 1.1126 has kept doors open for a technical correction.
- The spot could test 1.1140 (rising trend line resistance drawn from March low – April low and extended) if it manages to stay above 1.1088 in European session today.
- On the other side, a break below 200-DMA at 1.1052 would open doors for a slide to 1.10-1.091 (50-DMA) levels.
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