EUR/USD at major resistance as dollar weakness persists
James Chen, CMT February 15, 2018 1:37 PM
As the US dollar continued its persistent slump on Thursday despite enduring expectations of higher US inflation and interest rates, the EUR/USD rose to revisit major resistance around the 1.2500 handle, which is the area of recent 3-year highs. US government bond yields remained elevated near new multi-year highs in the aftermath of Wednesday’s US Consumer Price Index that was significantly higher than expected for both the headline and core inflation data and Thursday’s US Producer Price Index that was significantly higher than expected for the core data. Despite rising bond yields and increasingly hawkish Fed anticipation, the dollar has been unable to shake its virtually unrelenting bearish sentiment, as the US dollar index currently wallows near 3-year lows.
Combined with a resilient euro that has remained well-supported on a rising eurozone economy and keen anticipation of monetary policy tightening by the European Central Bank, the heavily weakened US dollar has helped boost EUR/USD back up to the noted 1.2500-area resistance, slightly above which a new long-term high was reached late last month.
The week ahead will be important particularly for the euro, as key services and manufacturing data from Germany, France and the eurozone as a whole, will be released on Wednesday. More importantly, central bank meeting minutes will be released from the US Federal Reserve and European Central Bank on Wednesday and Thursday, respectively. The relative policy stances between the Fed and ECB in their last meetings, as shown in the minutes, will likely make a significant impact on EUR/USD.
As noted, the 1.2500 price area is currently the key level to watch as markets determine whether the heavily oversold US dollar will finally be supported or if it has more to lose in the short-term. If a bottom for the dollar is indeed established, any EUR/USD turn down from around 1.2500 resistance could presage another pullback targeting 1.2200-area support once again.
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.