EUR/USD Analysis: losing ground amid risk aversion

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.1001

The US menaced the EU with tariffs, adding pressure on the common currency.
German ZEW survey expected to show a modest bounce in business sentiment.
EUR/USD poised to re-test the yearly low at 1.0926 ahead of the Fed.

The EUR/USD pair has traded with a heavy tone this Monday, settling at pre-ECB levels around 1.1000 at the end of the American session. The slump was driven by a risk-averse sentiment, triggered by weekend news, not only related to Europe. The primary catalyst for the negative sentiment was a drone attack on Saudi Arabia oil facilities, affecting up to 50% of the country’s production. Another headline that weighed on the shared currency came from the World Trade Organization, as the organization ruled in favor of the US in the case of illegal subsidies granted to European aerospace Airbus. Fears are that the US will now impose punitive tariffs to EU products for as much as $21billion.

The macroeconomic calendar was quite scarce, as the only report released by these economies was the US NY Empire State Manufacturing Index, which resulted at 2 in September, down from 4.8 in August and below the expected 4.0.

This Tuesday, Germany will publish the September ZEW survey on Economic Sentiment for the country and the EU, both seen improving from August readings, although still within negative levels. The US has scheduled August Capacity Utilization, and Industrial Production, the September NAHB Housing Market Index and TIC Flows for July.

EUR/USD short-term technical outlook

The EUR/USD pair has retreated further from the 1.1109 peak set last week, losing the positive stance seen on previous updates. The 4 hours chart shows that the pair is now trading below its 20 and 100 SMA, after faltering around the 200 SMA by the end of last week. The pair has also broken below the 38.2% retracement of its latest daily decline and is at risk of extending the slump toward the yearly lows. Technical indicators in the mentioned chart are diverging, as the Momentum aims north within positive levels while the RSI eases, currently standing at 38. The downside will become clearer on a break below 1.0980 a Fibonacci level and the immediate support.

Support levels: 1.0980 1.0955 1.0920

Resistance levels: 1.1020 1.1060 1.1100

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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