EUR/USD testing YTD lows after woeful German data, bears gunning for 1.16 next?

Traders are pricing in the potential for an earlier-than-previously-anticipated announcement that the Federal Reserve may start tapering its asset purchases after a run of strong data out of the US

FOREX 10

It’s been a rough week or two for the world’s most widely-traded currency pair.

Including today’s (unfinished) price action, EUR/USD is working on its eighth consecutive bearish day, with prices shedding nearly 200 pips from peak to trough over that period. This big bearish move was preceded by a “death cross”, where the 50-day EMA crossed below the 200-day EMA. For the uninitiated, this ominous-sounding development has ominous implications: It suggests that the longer-term trend has shifted in favor of the bears for the first time since June 2020.

As of writing, EUR/USD is probing its year-to-date low near 1.1700, with a break below that support area potentially opening the door for a quick continuation down to the next level of support, the November 2020 low around 1.1600:

Source: StoneX, TradingView

So what is driving the selloff?

Generally speaking, traders are pricing in the potential for an earlier-than-previously-anticipated announcement that the Federal Reserve may start tapering its asset purchases after a run of strong data out of the US, highlighted by Friday’s strong NFP report. On that front, tomorrow’s Consumer Price Index (CPI) report from July will be closely monitored, with another hot reading raising the odds of an earlier taper announcement, perhaps as soon as September or even later this month at the Jackson Hole Symposium.

Meanwhile, on the other side of the Atlantic, Europe has seen more tepid economic reports. Just this morning, the German ZEW economic sentiment survey came in at 40.4, well below the 54.9 reading economists were expecting and last month’s 63.3 print. This is the worst reading since November, which was itself the worst reading since the depths of the COVID recession in April 2020.

With little in the way of additional top-tier data our of Europe for the rest of the week, EUR/USD traders will key on the US economic releases and general risk appetite. If US data continues to beat expectations, EUR/USD could set a fresh year-to-date low as soon as this week.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

More from FX

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.