The EUR/USD went into this weekend below the 1.07950 mark and many Forex analysts have written about the weakness of the EUR as if it is trading alone on an island. However, the EUR/USD is trading in a correlated manner to a strong USD and this can be seen across Forex markets. While German economic data has certainly been weak and this may be used as a sounding board to ‘explain’ why the EUR/USD is losing value, this sentiment should be questioned.
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Since touching a high of nearly 1.12750 on the 18th of July the EUR/USD has essentially slid lower and made support levels look vulnerable. The fall in value of the EUR/USD has caused certain factions to point to economic problems in Europe regarding high inflation, recessionary pressures, and a lack of sound monetary policy from the European Central Bank. But the fact of the matter is that almost all other major global currencies are performing badly against a stronger USD.
EUR/USD Technical Support Levels Wavering as Nervous Behavioral Sentiment Grows
Traders should look to U.S short-term Treasuries as a culprit and as the major reason, the EUR/USD is sinking in value. Financial institutions are nervous and they are showing signs of being risk-adverse as they seek yields that are guaranteed. U.S. Treasuries from 2 to 5 years long provide solid financial returns without much risk. The purchase of U.S Treasuries must be done in USD and this is sparking the purchase of USD globally from assorted financial houses looking to park money. The 1.08000 level in the EUR/USD was tested on Wednesday, Thursday, and Friday of last week.
Yes, the EUR/USD looks oversold, but day traders should consider the heightened nervousness amongst financial institutions and their need to ensure profitable yields for their clients. The EUR/USD has not fallen on poor economic numbers from Europe in my opinion, the Forex pair has simply correlated to a stronger USD and the damage the ‘greenback’ has done against most major currencies the past month and a half as financial institutions have looked for risk-averse places to park their cash – like U.S Treasury bonds.
The 1.08000 Level is now a Focal Point for the EUR/USD for Day Traders
- As the week begins many traders will look at the 1.08000 level as an important psychological mark.
- If the EUR/USD remains under this ratio early this week, this type of trading could be interpreted as a negative signal.
- Bullish traders may be attracted to the lower EUR/USD values, but they should be extremely careful.
- The ability of the EUR/USD to move lower has brought the currency pair to lows not seen since the second week of June. However, it should be noted the EUR/USD was trading near 1.06700 on the 7th of June.
EUR/USD Weekly Outlook:
The speculative price range for EUR/USD is 1.07050 to 1.08770
The EUR/USD did produce rapid price momentum lower on Thursday until Friday of this past week. Perhaps that is a sign that the market action was overdone and that nervous market sentiment will start to calm down which could produce some upward momentum for the EUR/USD. However, timing the start of increased risk appetite to reignite in Forex and the EUR/USD remains problematic. Traders need to remember the Non-Farm Employment Change numbers will come from the U.S. this Friday. But speculators also need to consider U.S. data has not been particularly good the past few weeks, much like Europe.
Day traders pursuing the EUR/USD should be careful. The past month has delivered strong downward momentum and while it might be attractive to dream about catching the next big rush upward, this consideration needs to be treated with solid risk-taking tactics. While it may be enticing to think the EUR/USD is going to march higher sooner rather than later, support levels have continuously been made vulnerable over the past month. The 1.07800 support level should be watched early this week, if it holds this may be a sign buying momentum could build, but nervous sentiment in financial institutions makes this a dangerous short-term perspective. The price movement in the EUR/USD has been volatile and perhaps the coming days will continue to deliver choppy values.