EUR/USD 'glass floor' near 50-DMA; How Trump 'harpooned' the parity party?
|Currently, EUR/USD is trading at 1.0620, down -0.49% or (51)-pips on the day, having posted a daily high at 1.0676 and low at 1.0621.
The Euro vs. American dollar seemed under pressure in the middle of the week as the European Monetary Union reported Gross Domestic Product s.a. (YoY) at 1.7% wasn't bad; wasn't good. However, when a fragile union clocks (0.1%) 'worse than expected' figure it translates to market participants as vulnerable and not worth the risk. Hence, if we were to study the past, then the UK's 0.6% GDP figure made the perfect example to keep in mind as the result was 'in line' not-spectacular but heavily concentraded in the service sector; what happened next?
Furthermore, Trump's worldwide 'devaluation' accusations are not far from the truth which explains why Draghi refused to elaborate on the matter. Before the new US administration, no other nation made such bold statement on the matter as the 'Dollar is doomed' rhetoric translated in higher commodity prices and close to a decade where the shared currency shined just as gold.
Hence, now that the charade is evident and the ECB is more than limited, Trump harpooned any short-term parity probability as politics and a few tweets will prevent the exchange rate to trade for too long near or below the 1.0330 handle.
ECB should continue to be open to rate cuts - ECB's Lane
Historical data available for traders and investors indicates during the last 7-weeks that EUR/USD pair had the best trading day at +1.13% (Jan.5) or 119-pips, and the worst at -0.80% (Jan.18) or (84)-pips. As of writing, the US 10yr treasury yields fell from 2.46% to 2.41%, down -1.38% on the day or -0.0338.
Technical levels to watch
In terms of technical levels, upside barriers are aligned at 1.0750 (100-DMA), then at 1.0870 (high Dec.8) and above that at 1.0950 (high Nov.10). While supports are aligned at 1.0600 (50-DMA), later at 1.0453 (low Jan.11) and below that at 1.0339 (low Jan.1). On the other hand, Stochastic Oscillator (5,3,3) seems slightly extended heading north. Therefore, there is evidence to expect further Euro gains in the near term. After a 'surprise' in risk sentiment, the upside is likely to be limited between the pair's 100-DMA and 200-DMA.
On the long-term view, the pair continues its previous uptrend from 1.0620, as of writing, trading 120-pips above 1.0706 (short-term 38.2%% Fib), then the next logical resistance 1.0820 (short-term 50.0%Fib) makes a perfect target for risk-on sentiment and above that at 1.0932 (short-term 61.8% Fib). To the downside, bears need an open and close below 1.0706 to increase the selling pressure to drag the pair lower, that would open doors towards 1.0566 (short-term 23.6% Fib) and 1.0339 (low Jan.1) would be the next critical support.
A break below this level, would open doors and attract massive short-sellers towards parity. However, 1.0070 figures as the euro's last stand, those couple pips away from the round mark level make the difference between an all-time low-bottom vs. the 'infamous' parity.
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