EUR/USD bearish correction, testing minor support 1.1980 level

Ross J Burland FXStreet

Currently, EUR/USD is trading at 1.1988, up 0.08% on the day, having posted a daily high at 1.2071 and low at 1.1955.

EUR/USD has taken a nose dive back below the 1.20 handle, testing the previous resistance of 1.1980 with slow stochastic that is testing overbought levels.

Is this a buying opportunity?

The markets are rattled by the N.Korean situation, although as analysts at Brown Brothers Harriman pointed out earlier, these risk factors tend to escalate quickly and dissolve faster and we will soon be back to Central Bank divergences. The big date in September is the 7th when the ECB meets and markets are expecting a potentially more hawkish tone, but one that is cautious so not to see the euro soaring higher. However, markets could well be disappointed with a less hawkish ECB explaining how far off their inflation target is still, which will put a brake on interest hikes, and with the potential that the ECB's President, Mario Draghi, will keep investors in the dark.

USD/JPY highly correlated to S&P 500 and the Dow Jones - BBH

Meanwhile, the dollar is taking hit as markets price out a move in policy from the Fed in September's meeting and draw back forecasts for a Demeber hike - just because the FOMC said that they will start to reduce the balance sheet in September, we should not forget it was years before the Fed finally hiked interest rates, and that is weighing on traders minds currently.

We will first have the nonfarm payrolls this week and analysts at ING explained that disappointing wage data won’t help the Fed’s case for higher rates. "Expect markets to remain skeptical about the Fed's hiking plans as Friday's all-important wage growth figure looks set to come in below consensus."

EUR/USD levels

EUR/USD is back below the l 1.2000 level testing the 1.1980 support ahead of the next minor support at the early August high at 1.1910. Thereafter, comes in at the 1.1848 August 11 high. "While the next lower August 25 low holds, upside pressure should be maintained," analysts at Commerzbank argued. "Only if an unexpected drop below the 1.1662 mid-August low were to be seen would the 1.1654/13 area be targeted. It is where the late July low meets the five-month support line," the Commerzbank strategists added while noting that further up sits the 50% retracement from the move down from the 2014 high at 1.2168.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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