- Euro sellers failed to break the 1.2400 support area recently against the US dollar.
- More downside likely in EURUSD as fundamentals do not support gains in the Euro in the mid-term.
- British pound collapsed recently, as the inflation report from the Bank of England kind of sidelined interest rate expectations.
The Euro created a new yearly low recently and traded as low as 1.2351 against the US dollar. There is a monster sliding channel formed on the daily timeframe of the EURUSD pair, which acted as a support and resistance for the pair on a number of occasions. Currently, the pair is struggling to break the 23.6% fib retracement level of the last drop from the 1.2885 high to 1.2351 low. We need to see whether the pair can manage to clear the mentioned fib level or not. If it manages to break higher, then there is a chance of a move towards the channel resistance area where sellers are likely to appear again. The daily RSI is well below the 50 mark, which is a strong bearish signal in the medium term.
On the downside, initial support is seen around the last low of 1.2351. It is important to note that there is a monster support around the 1.2300-1.2250 area in EURUSD, which might act as a solid hurdle for the Euro sellers. The pair is currently trading a lot below the 100 daily moving average, which might attract buyers for a minor correction that can be seen as a selling opportunity. In short, any major rallies or correction in the EURUSD pair might find sellers moving ahead.
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Selling EURUSD closer to the channel resistance trend line is a good option as long as the pair is trading inside the channel.
There are several important releases lined up in the Euro zone in the coming session, including the German Gross Domestic Product (GDP), Euro zone GDP, France GDP Italian GDP and Spanish GDP. The Euro zone Gross Domestic Product will be released by the Eurostat, which might ignite swing moves in the Euro moving ahead. The market is expecting the Euro zone to register an increase in the GDP by 0.1% in the third quarter of 2014, which is lower from the last reading of 0.2%. When we consider the yearly change, then the Euro zone GDP is expected to grow by 0.7%. If there is a slight miss in the GDP, then it would weigh a lot on the EURUSD pair in the near term.
Earlier, the German consumer price index was released by the Statistiches Bundesamt Deutschland. The outcome was mostly in line with the expectation. The report mentioned that the German CPI increased by 0.8% in October, compared with the last month of the previous year. When we consider the monthly change, then there was a decrease of 0.3%, down from the last reading of 0%.
Overall, nothing is going right for the EURUSD pair, and selling is the only preferred option in the near term.
Aayush Jindal is Chief Currency Strategist at Forex Bonus which is one of the most widely used forex sites on the web. Forex Bonus offers trading news and reviews about forex brokers.