EUR/USD eases further as dollar extends rebound on stronger GDP, ADP
Fawad Razaqzada August 30, 2017 11:31 AM
The single currency is partly lower because of the drop in the EUR/USD exchange rate as the dollar firms up across the board thanks to short covering and positive surprise in US data.
From being one of the strongest to one of the weakest currencies in space of two days. That’s right, the euro is actually falling for once. The single currency is partly lower because of the drop in the EUR/USD exchange rate as the dollar firms up across the board thanks to short covering and positive surprise in US data. But with some euro crosses like the EUR/GBP also being lower, this suggests there’s actual internal weakness in the currency. However, this may simply be because of the fact that the EUR/USD has hit a massive area of resistance around 1.20 this week, rather than weakness in Eurozone data. After all, there hasn’t been any significant Eurozone data released today. If anything Spanish and German CPI measures of inflation were more or less in line with the expectations.
It is worth remembering that after a significant appreciation of the EUR/USD exchange rate, many buyers have been happy to take profit around the 1.20 handle, as the sellers are having one more attempt to push the currency pair lower. This time there may be a good reason for them to do us: most of the negativity may be priced in for the dollar. What’s more, today’s release of US macro pointers were stronger than expected. US second quarter GDP came in at 3.0% quarter-over-quarter in an annualized format versus 2.7% expected and 2.6% in the initial estimate. Earlier in the day saw the August ADP employment report print 237,000 compared to 185,000 expected, while the July reading was revised higher from 178,000 to 201,000. It is now all down to Friday’s official nonfarm payrolls report. If this also shows further strength in the labour market and another rise in wages then calls for a December rate rise may increase, triggering further dollar buying interest. Conversely, a very weak jobs report may have the opposite effect.
Regardless of the fundamentals, the chart of the EUR/USD is painting a bearish picture at the moment. The world’s most heavily traded pair has hit a band of resistance around the psychological 1.20 area, including the July 2012 prior support, now resistance, at 1.2040/45 area . So far one can only treat this as a short-term pullback inside what still is a long-term upward trend. After all, we haven’t had a break in market structure of higher highs and higher lows yet. However, if the EUR/USD breaks below the initial support area of 1.1880-1.1905 (old resistance) then we may see an accelerated drop below that region and into the next support at 1.1815/17 level – this being the last resistance pre last week’s breakout. Below Friday’s candle at 1.1775, the bias would turn decidedly bearish. And if the EUR/USD eventually breaks below the last swing low at 1.1160/65 level then we will have our first lower low.
So, things don’t look too great for the EUR/USD at the moment, mainly because of the dollar’s widespread recovery. However, the sellers have a lot of wood to chop as key support levels are being tested. Friday’s US jobs report could complicate the EUR/USD’s outlook in the event of disappointment.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.