Forex traders of the EUR/USD were ‘treated’ to a couple of days of fireworks from the currency pair. A high of nearly 1.10120 was hit on Thursday, but by Friday a depth of around 1.08440 was touched. Setting off the highs for traders perhaps, was speculative buying zeal which still doesn’t seem to believe the U.S Federal Reserve will increase its Federal Funds Rate in July. However, causing a massive reversal which likely wiped out a solid amount of bets on the EUR/USD upwards momentum was the dramatic realization the E.U is under a bad economic cloud.
Purchasing Manager Index data from Germany and broad European Union readings showed the manufacturing sector is under strain. While the E.U numbers were negative, the German outcome was worse. The ECB will conduct a global banking forum this week, starting tomorrow, in Portugal in which inflation will be discussed. While some technical traders may not believe fundamentals could impact the EUR/USD in such a significant manner, the results from Friday’s downturn seem to be more than a mere support level proving vulnerable.
EUR/USD Price Velocity Downwards may have blown through Stop Losses
The rapid decline on early Friday of the EUR/USD was fast enough that some traders may have seen their stop losses not get filled at their expected prices. The velocity of the EUR/USD was fast and trading conditions may have another dark shadow to deal with on Monday’s opening via the developing news from Russia. Traders who do not have active positions may want to wait for a couple of hours before jumping into the EUR/USD tomorrow morning.
When support failed around the 1.09100 ratio on Friday, the EUR/USD skidded below the 1.08500 abruptly, but then reversed upwards. Perhaps Friday’s bad PMI Manufacturing data from Europe will be the ‘final’ admission financial institutions needed to find a ‘bottom’ for the EUR/USD in order to start incrementally looking for upwards price action again. However, risk events do loom this week via the ECB’s banking forum and German data.
Business Climate and Resistance Levels will be Speculative Tools for the EUR/USD
- Traders may be targeting the 1.09000 level as a higher value to begin trading on Monday.
- German Ifo Business Climate results will be published on Monday and the results may prove to be negative, but some speculators may have ‘baked’ a poor outcome into the price of the EUR/USD already.
- ECB President Legarde will be speaking tomorrow and late in the week, her comments will likely be hawkish regarding inflation.
EUR/USD Weekly Outlook:
The speculative price range for EUR/USD is 1.07900 to 1.09750
Caution should be practiced by traders this week as financial institutions deal with the developing news from Russia’s political drama. The EUR/USD could be affected by sentiment regarding the problems on the European continent. While support seemed to prove strong around the 1.08440 mark on Friday, the ability to hit lows so suddenly is a reminder of how volatile the EUR/USD and other Forex pairs can be.
The current support levels near the 1.08800 and 1.08700 levels should be watched on early Monday, if they prove durable this could mean traders have digested the Russian news, and the poor economic numbers from Germany late last week. Trading in the EUR/USD could see additional volatility, however, and traders should have full risk management working because behavioral sentiment could prove extremely nervous if ‘noise’ hits via the Russia situation or surprisingly bad economic results again from Germany.
Traders looking for upside price action in the EUR/USD may be proven correct, but it may take strong emotional fortitude to bet on upwards price action early this week. If the 1.09000 is penetrated and values are sustained above, the EUR/USD could test additional resistance levels and perhaps challenge the 1.09400 to 1.09600 ratios. Traders though should monitor what the ECB and other central banks including the Federal Reserve say about inflation this week in Portugal.
