EUR/USD: technically back below bullish conditions, target 55-day ma at 1.0674?

Ross J Burland FXStreet

Currently, EUR/USD is trading at 1.0753, down -0.56% on the day, having posted a daily high at 1.0828 and low at 1.0740.

EUR/USD is consolidating the recent drop from the 1.09 handle from the start of this week targeting the 200 smoothed sma at 1.0735. While there were headlines suggesting that the ECB's message at its March 9 meeting has been overinterpreted by the markets as a step to exit, the negotiations between the EU and Brexit are also due to start now that PM May triggered Article 50. This is potentially a far greater risk over the medium term weighing on the euro with much of the downside in sterling already priced in. EUR/GBP has reversed its gains on the 0.87 handle and has dropped to 0.8623 lows today.

EUR/USD near-term risks

In the near term and within a month, the French elections will take the limelight. however, it is unlikely that LePen will win, but NOT impossible should the 35% of those who are yet to vote to decide to come forward in the second round and do a Brexit/Trump style ambush on the status quo. Given Le Pens anti-EU and euro campaign, that could seriously hurt the euro on such headlines.

With an improved risk sentiment in markets, for now, the dollar is outperforming the euro as yields move up and stock markets rally. The GOP this week confirmed their commitment to tax reform and that has fueled a bullish scenario for US markets once again, supporting a bid in the greenback.

Intermarket VIX: a safe ride for risk-on markets, or is it?

EUR/USD levels

On a technical basis, the bullish case has neutralized while the euro failed to close 1.0877 200 day moving average. With this break below the 1.08-handle there are mounting risks to the downside. "Below 1.0760 will alleviate immediate upside pressure and trigger a slide back to the 55-day ma at 1.0674," explained analysts at Commerzbank.

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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