Will the EUR/USD surge extend higher?
James Chen, CMT November 14, 2017 9:03 PM
Early on Tuesday, the euro surged sharply at the expense of other major currencies, most notably the struggling US dollar.
Early on Tuesday, the euro surged sharply at the expense of other major currencies, most notably the struggling US dollar. This sizeable euro surge was driven largely by continued positive economic data from the Eurozone, which has helped to keep the shared currency aloft despite a European Central Bank that has shown reluctance in tightening monetary policy. The most salient news boosting the euro on Tuesday morning was a better-than-expected German Q3 GDP reading of +0.8% against a prior consensus forecast of +0.6%. Additionally, Italy’s Q3 GDP was also strong at +0.5%, matching its best reading in around seven years.
Against the US dollar, Tuesday’s euro rise was pronounced, establishing a new two-and-a-half week high slightly above 1.1800, without substantially paring those gains throughout most of the day. The US dollar was heavily pressured on Tuesday by both this sharp euro surge as well as continuing concerns over US economic growth and the likelihood and timing of US tax reform. The dollar will be tested further on Wednesday by the release of US CPI inflation data for October as well as key retail sales data.
From a technical perspective, EUR/USD tentatively broke out on Tuesday above both a key descending trend line extending back to the early-September 1.2091 high, as well as the 50-day moving average. After Tuesday’s euro surge, EUR/USD should be driven more by the dollar than the euro for the remainder of the week. Helping to drive the US dollar will be the noted inflation and retail sales data on Wednesday as well as how the US tax reform debate plays out in the next several days.
If the US dollar remains pressured in the short-term after Tuesday’s dollar breakdown, EUR/USD could surge further towards 1.1900-area resistance. With clear monetary policy divergence between the Fed and ECB currently still prevailing, however, there is a strong possibility for an impending turn back to the downside and resumption of the EUR/USD correction from its recent long-term highs. The trigger point for such a resumption remains around the key 1.1600 support area.
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.