EURUSD Drops To November 2013 Low
ForexTime | Jul 28, 2014 09:29AM ET
After stating during a testimony to the EU Parliament one week prior that the EUR/USD was overvalued, ECB President Mario Draghi will be content to see that the EUR/USD continued to move to the downside last week. In fact, the euro concluded the week at its lowest level against the dollar since November 22nd 2013. Bearish movement in the EUR/USD intensified last Tuesday, after news emerged the EU Ministers were congregating in Brussels to discuss the possibility of further economic sanctions on Russia. Further bearish momentum was felt on Friday, after Germany’s latest IFO data missed expectations. This encouraged a new yearly low, 1.3421 to be recorded.
In truth, which direction this pair fluctuates during the first few days of the week is largely dependent on whether there will be any risk appetite in the currency markets in anticipation of the latest US GDP and FOMC decision on Wednesday. After losing over 100 pips last week, it is likely the EUR/USD will commence the week trying to regain a proportion of these losses. As well as the latest FOMC decision and US GDP on Wednesday, the markets will also be focused on the latest German CPI. On Thursday, the latest EU CPI is announced. It is no hidden secret that the EU economy is currently encountering low inflation levels and according to Bloomberg, EU CPI remained at 0.5% for the third successive month in July. Confirmation of this will reopen the debate regarding whether the ECB needs to introduce a QE program. Therefore, further bearish moves in the EUR/USD remain possible.
Moving onto the technicals on the Daily timeframe, a bearish trend line formed in April continues to dictate the overall direction of the EUR/USD. The overall EU sentiment remains bleak and it will take quite a contrast in fundamentals (such as EU CPI improving) for this trend line to conclude. Upcoming EUR/USD support levels are located at 1.3412 and 1.3358. A downside move towards the latter level would represent the lowest EUR/USD valuation since October 2013.
Both the RSI and Stochastic Oscillator are suggesting this pair is currently oversold and if the EUR/USD does begin this week trying to recover some of last week’s losses, possible EU resistance can be seen at 1.3460 and 1.3474.
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