- EUR/USD reversed sharply from monthly highs, breaking key technical levels.
- A stronger US dollar and the Italian fiscal scenario pushed the pair to the downside on Friday.
The EUR/USD pair dropped on Friday for the third-day in-a-row affected by the announcement of the Italian government of a 2.4% budget deficit. Also, the comments from Italian officials added to concerns. The euro managed to recover ground during the American session but it was about to end Friday on a weak note.
US data failed to boost the greenback in the market and EUR/USD moved off lows. The pair bottomed earlier today at 1.1569, the lowest since September 11 and then managed to rise back above 1.1600. The recovery was capped by 1.1625 and near the end of the week was trading at 1.1615, 135 pips below the level it had a week ago, the worst decline in almost two months.
EUR/USD rejected from above 1.1800
Earlier over the week, the euro rose above 1.1800 but like what happened last week, it was rejected and pulled back sharply. It broke a short-term uptrend line, opening the doors to more losses from a technical perspective. Now the 1.1520/30 support is back on the radar.
The retreat from 3-month highs took place on the week the Federal Reserve rose the Fed fund rate for the third time of the year and signaled another hike in December. When the euro was looking to make a clear break above 1.1800 dropped back to the average price of the last five months. Over the short-term, monetary policy expectations could continue to provide support for the US dollar but it is not clear what could happen on a longer-term perspective.
“The next big move in EUR/USD is up when the first ECB hike draws closer and we forecast 1.25 in 12M. We still expect a steeper EUR yield curve on a 12M horizon. The ECB maintains a relatively tight grip on the short end of the curve, while the 10Y segment of the curve is pushed higher by rising US yields, the end of ECB QE and the pricing of ECB rate hikes in 2019-20. Our base case is still that the ECB waits until December 2019 to hike for the first time (20bp). While our euro area inflation forecast is in line with the ECB projection this year, our profile is lower for next year making a December hike more likely than a September hike. A 10bp hike is priced in by September 2019 and 20bp by December 2019”, wrote analysts at Danske Bank.
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.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.