EUR/USD Analysis and Outlook – Break of Major Support Coming?
In terms of EUR/USD, the euro is in a downtrend and we are now at a key level of support which we expect to break and trigger more downside in the pair – our view is that any rallies are likely to be minor and selling opportunities. Our view of the fundamentals, sentiment, and technicals is below.
The Economic and Interest Rate Outlook
In terms of the economy the US is doing far better than eurozone and the interest rate outlook clearly favors the US as we can see on the charts below.
The market has been bullish about a broad-based euro zone recovery but the problem is the Southern, poorer nations are not going to recover quickly. Unlike the Fed the ECB cannot withdraw stimulus soon as nations such as Spain, Italy, Greece, and Portugal cannot take higher borrowing costs. If we look at yields in the euro zone there at record lows and the US has a clear yield advantage.
Sentiment: Large Funds Still Remain Long Euro
Despite the big fall in the Euro the latest speculative positioning report from the COT still shows speculators long the euro. Much of the fall in the euro has been due to big funds exiting euro longs and we now expect them to move to sell the euro which will trigger the next leg of the downtrend:
In terms of the technicals, our view of the key support and resistance levels is below.
On the monthly chart if we break support at 1.1700 we would expect a move down to 1.1400 then 1.100. On the daily chart, we have sideways price action and expect any rallies to meet resistance at the 1.1800 level. We have sideways consolidation for now but the upside is limited in our view and a break of 1.1700 is likely to follow through to the downside on higher volatility.
Research provided by LearnCurrencyTradingOnline.com
The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.
Before making any investment decisions, you should know that:
– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.
– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.
– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.
– Past performance is not a guarantee of future results.