- EUR/USD witnessed some aggressive selling on Monday amid a strong pick up in the USD demand.
- Fresh coronavirus jitters triggered a selloff in the equity markets and benefitted the safe-haven USD.
The EUR/USD pair witnessed some aggressive selling on the first day of a new trading week and dived to six-week lows amid a strong pickup in the US dollar demand. Rising odds of fresh lockdown measures to curb the second wave of coronavirus outbreak triggered a fresh wave of the global risk aversion trade. The anti-risk flow was evident from a selloff in the equity markets, which, in turn, provided a strong boost to the greenback's status as the global reserve currency.
Apart from this, the shared currency was further weighed down by not so optimistic comments by the ECB President Christine Lagarde, saying that the economic recovery remains very uncertain, uneven and incomplete. Lagarde reiterated that the ECB stands ready to adjust all of its instruments as appropriate and that a higher exchange rate put prices under downside pressure. The combination of factors led to steep intraday fall to the 1.1730 region, though the pair showed some resilience at lower levels and finally settled around 40 pips off daily lows.
The USD bulls turned cautious amid expectations that the Fed Chair Jerome Powell will reaffirm to keep interest rates lower for longer during his congressional testimony later this Tuesday. This makes it prudent to wait for some strong follow-through selling before traders start positioning for any further near-term depreciating move. In the meantime, Tuesday's release of the preliminary estimate of Eurozone Consumer Confidence for September, along with the second-tier US economic data will be looked upon for some trading impetus. The US economic docket features the release of Existing Home Sales and Richmond Manufacturing Index, which might influence the USD price dynamics and help traders to grab some short-term opportunities.
Technical outlook
From a technical perspective, the set-up now seems tilted in favour of bearish traders and supports prospects for further downside. Hence, some follow-through weakness towards August monthly swing lows, around the 1.1700-1.1695 region, now looks a distinct possibility. Failure to defend the 1.1700 mark will be seen as a fresh trigger for bearish traders and turn the pair vulnerable to prolong the recent corrective slide further towards testing the 1.1600 round-figure mark.
On the flip side, the 1.1800 mark becomes immediate strong resistance. Any subsequent positive move might now be seen as a selling opportunity and remain capped near the 1.1850-60 supply zone. That said, a sustained move beyond might trigger a short-covering move and push the pair further towards the 1.1900 mark en-route the next major hurdle near the 1.1935-40 region. The momentum could further get extended towards the key 1.2000 psychological mark.
-637363491728828266.png)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.