EUR/USD Daily Forecast – Euro Pinned to 27-Month LowsAfter a sharp fall on Friday, EUR/USD is consolidating at lows not seen since May 2016 to start the new week.
US Markets Off on Holiday Today
It might be a slow start to the week as US traders are off for Labor Day. Volatility is likely to pick up later in the week as the latest US jobs figures are scheduled for release on Friday and as Fed Chair Powell will give a speech.
Further developments on the trade war between the worlds two largest economies will also be important for the exchange rate. Last week, a message from Trump that the two parties will continue discussions triggered a shift in the markets. This caused a tumble in EUR/USD to not only erase losses from the prior week but also for a decline to lows not seen in over two years.
Economic data out of the Euro area earlier today came in mostly in line with analyst expectations, however, continue to show a contraction in the manufacturing sector. Data from Germany, Italy, and the Eurozone reflected a continued slump in the industry. France came out ahead and showed improvement in August. Nevertheless, the overall data will tend to keep investors concerned over the health of the Euro economy.
Friday’s drop in EUR/USD was significant as it drove the exchange year to a more than two year low. In addition to that, the pair also fell below 1.1000 which is considered to have a psychological impact.
While below the figure, the pair stands to continue declining. The next major area of support I see comes in at 1.0833.
I do think the exchange rate is a bit oversold at current levels. Sometimes, unusual volatility-driven moves are seen at the end of the month. Perhaps Friday’s decline was exactly that.
If the pair tries to recover here, sellers are likely to step in at the 1.1000 level. Beyond that, further resistance is found at 1.1030 as it previously provided support.
- EUR/USD is moving sideways after a sharp fall on Friday.
- Volatility may slow as US traders are off on holiday today.
- Recovery rallies are likely to be met by sellers at 1.1000 followed by 1.1030.