EUR/USD Daily Price Forecast – EUR/USD Opens at New Lows over Turkish Crisis

EUR/USD moves down as Turkish crisis weighs down European markets, meanwhile decline in German 10-year bond yields over investors move towards safe haven instruments add further bearish sentiment to the common currency.
Colin First

The new trading week has opened to see the EUR/USD further down in a continuation of last week’s sell-off, with the major pair plunging to 1.1368 at the opening bell. Contagion threats from Turkey’s banking sector are pushing traders back into the US Dollar with the Turkish lira collapsing 42% in 2018 and showing no signs of slowing down, while the recent realization that European banks are further exposed to a possible Turkish implosion has seen the EUR take a header, falling over 2.8% in August alone. The EUR touched a 13-month low versus the US dollar as trading got underway this week, with markets preparing for more turmoil involving the Turkish lira. After hitting the lowest at 1.13649, the pair is currently trading at 1.1387 down 0.20% on the day. Meanwhile investment flow to safe haven instruments saw German 10-year bond yields edge lower.

Investors Focus on Turkey’s Economic Plan Action Announcement 

Turkey’s Finance Minister Berat Albayrak has notified Turkish media outlets on Sunday that Turkey will be taking steps beginning on Monday morning to begin easing market tensions over the rapid decline in Turkey’s lira. In an interview with Hurriyet newspaper, Albayrak said a plan has been prepared for banks and the real economy sector including small to mid-sized businesses, which are the most affected by the foreign exchange fluctuations. He added that the banking watchdog had also limited swap transactions in the currency. There were no details on the so-called plan, so the bounce so far has been muted. The lira extended its weakening bias, hitting a new record low of 7.0081 versus the US dollar.

On release front, there is very little action across the board, leaving markets to drift while Euro traders will be keeping a keen eye out for Germany’s Harmonized CPI (forecast 2.1%, last 2.1%) and preliminary Q2 GDP figures (forecast 0.4%, last 0.3%), both dropping early Tuesday morning at 06:00 GMT. A look at price action so far in today’s Asian market hours indicate that the pair could try close the Gap down move from when trading started for the day and gain stability around 1.1400 handle, however for the pair to gain stability Turkey’s economic plan action announcement, due later today, should engineers a sharp bullish reversal in Lira. On the flip side if positive headlines regarding banking sector exposure to Turkey fail to materialize quickly at the outset of the European market session the pair could continue to see steep fall towards 1.1320/1.1300 price handle. Expected support and resistance for the pair are at 1.1340 / 1.1300 / 1.285 and 1.1415 / 1.1465 / 1.1510 respectively.

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