Euro breaks lower towards key levels

EURUSD, H1

The Dollar has traded firmer against mot other currencies, the Yen being the main exception, with USDJPY having held steady in the mid 113.0s. Driving were weakness in Dollar block currencies, amid a backdrop of tumbling stock markets and sub-forecast Chinese retail sales and production data, and specific weakness in both the Euro and the Pound. EURUSD has posted its biggest drop of the month so far, falling over 0.6% in making a 16-day low at 1.1281. EURJPY concurrently printed an eight-day low and EURCHF has tumbled back toward recent two-and-a-half-month lows. The Euro selling catalyst was disappointing preliminary December PMI data out of the Eurozone, where the composite reading fell to a 49-month low of 51.3, down quite sharply from November’s 52.7 reading. This data feeds the narrative in markets of a Eurozone economy losing growth momentum, which coupled with concerns about the various populist political movements in Europe – of which the riots in France, budget planning woes in Italy and Brexit are all symptomatic of – is making the Dollar a preferable alternative to the Euro, despite the recent recalibration in Fed policy expectations.

EURUSD has next support at 1.1265, which is the S3 and the H4 low from November 14. The November low was 1.1215. Resistance is now S1 at 1.1326, the 20-period moving average at 1.1342 and the daily pivot and 200-period moving average at 1.1360.