EUR/USD day traders will have interesting decisions ahead this week concerning speculative positions as the currency pair hovers within sight of important mid-term lows.
The EUR/USD went into the weekend near the 1.08725 ratio as it created a one-month low and finds its value floating near what could be considered crucial mid-term support. Having touched a high around the 1.12775 mark on the 18th of July, most bullish speculators of the EUR/USD have likely found its trajectory downward the past month painful. Risk-averse sentiment has caused the USD in recent weeks to become stronger, even as many financial institutions believe the U.S. Federal Reserve will have to become less aggressive moving forward.
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While some traders will certainly point to Friday’s core Consumer Price Index reading from the E.U. as a culprit regarding the lower trend of the EUR/USD, it should be remembered that the numbers actually came in as forecasted. Economic data from Europe this coming week will see Manufacturing Purchasing Managers Index readings on Wednesday and German Business Climate data this coming Friday. However, it is likely that market action in the U.S. will continue to spur the EUR/USD in a particular direction.
Downwards Momentum Consistent in the EUR//USD the past Month
On Monday of last week, the EUR/USD fell below the 1.09000 ratio and then it found itself struggling to fight its way above this mark for the next couple of days. A high of around 1.09510 was seen briefly on Tuesday, but the EUR/USD then began to march lower and after falling through the 1.09000 ratio again on Wednesday, the currency pair was only able to climb above this mark for a little more than two hours on Thursday. Before going into this weekend the EUR/USD displayed negative selling momentum as support levels came into full view while testing mid-term lows.
The last time the EUR/USD was near its current value was on the 7th of July. Before reaching this level, the week before on the 31st of May, the EUR/USD had sunk to a low of nearly 1.06300, which it hadn’t seen since the middle of March. Speculators who are convinced the EUR/USD is now oversold may be proven correct eventually, but the currency pair has traded lower in the mid-term. Global risk sentiment has to be watched intently and traders can do that by watching the U.S Treasury yields. If the U.S Treasury yields start to move lower this week, this could mean risk appetite is increasing a bit and could mean the EUR/USD could spark higher, but that is a big ‘if’ within current market conditions.
Volatility and Choppy Conditions Likely to Continue for the EUR/USD this Week
- The 1.09000 level this week will now serve as a target for bullish speculators. If this level can be penetrated higher and sustained this could be a near-term bullish signal.
- If support levels near the 1.08500 come under attack and then prove vulnerable this could ignite more selling and a test of the 1.08400 to 1.08300 ratios rather quickly.
- Bullish traders who are convinced the EUR/USD is oversold and are looking for a bottom to ignite their buying positions should remain cautious in the near term.
EUR/USD Weekly Outlook:
The speculative price range for EUR/USD is 1.08175 to 1.09650
Price velocity downwards has not been violent in the EUR/USD, but it has been rather steady. The notion that there may be one more push downwards technically in the EUR/USD may make sense, and under the present nervous conditions, traders should not discount the amount of fundamental sentiment which is forcing the EUR/USD to test mid-term lows.
Yes, the EUR/USD does look oversold at its current values, but timing a sustained move higher is a guessing game particularly when financial institutions continue to show nervous sentiment. The Jackson Hole Symposium in the U.S. will take place later this coming week, as global central bankers meet to discuss policy they will certainly make their viewpoints known. But, we know what they are essentially going to say, they will say they remain concerned about inflation and limited growth. Traders need to be cautious this week and use solid risk-taking tactics in the EUR/USD.