EUR/USD Current price: 1.1406
- Risk aversion eased but financial markets are not yet out of the woods.
- Profit taking probably the main reason for the dollar's recent retracement.
Risk-off is the main theme this Monday, as a result of Turkish Lira´s collapse last Friday, spurring concerns of contagion among emerging markets and the EU, in the case of this last, after reports indicating that ECB's policymakers are concerned about the local banks' exposure to Turkey. Stubborn President Erdogan refuses to raise rates, even if temporarily, to halt the currency's depreciation, although some temporal relief came at the beginning of the week after the Central Bank of the Republic of Turkey announced is ready to provide all the liquidity needed by local banks.
Relief was exacerbated by headlines indicating that the US pastor incarcerated in Turkey could be released, although there was no official confirmation, and the news was quickly denied by the US embassy in Ankara, to which the report was attributed. Equities in Europe recovered from their daily lows, still trading well into negative territory, while the greenback and the yen eased modestly across the board. The EUR/USD pair recovered from a daily low of 1.1364 to 1.1413, now struggling to retain the 1.14 level.
The EU macroeconomic calendar had nothing relevant to offer, and the same happens with the US one, with only a Treasury auction scheduled for today. In the week, however, there will be plenty of scheduled events that will work alongside with political headers to set majors' direction.
US indexes are poised to open barely lower, reversing most of their early losses, as despite the news on pastor Brunson were denied, speculative interest is rushing to take some profits out of the table as dollar's rally is way overstretched.
Technically, the ongoing recovery is a modest correction that does not affect the dominant bearish trend but it could extend up to the 1.1440/50 region a major static resistance area. Sellers could reappear around this last. In the meantime, the 4 hours chart shows that the pair is trading well below a sharply bearish 20 SMA, which accelerated south below the larger ones, while technical indicators are turning higher in oversold territory, suggesting that buying interest is quite limited. Failure to accelerate north should lead to a new leg lower toward the 1.1300 figure.
Support levels: 1.1360 1.1330 1.1300
Resistance levels: 1.1420 1.1450 1.1485
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