- 3-years ago EURSUD fell 3% in June.
- 17-years ago the price fell nearly 3.20% during 1H.
- Rate hike factor backed into the USD strength.
June performance is a glance that how the ground can shift rapidly without one prepared. The path of EURUSD appears to be downwards. But how low?
I believe everyone could accept that the Fed meeting was the core event in June and in the half of the year as well. And definitely, no one anticipated that Fed quick move. Most of the economists and FX specialists wrong-footed on the dollar, which caused a USD short squeeze-but it was a teaser, we believe. We continue to see that the dollar squeeze-action could continue in the coming months. Whereas, PEPP taper talks in the coming months are the only hope to the EUR bulls now. This event only could change the EURUSD fate.
Let’s have a look at the historical dollar index June performance.
As shown on the above chart, June’s performance for the dollar index was the largest since 2000. As a result, the G10 currencies fell 2.90% on average against the dollar during the same period (below table).
G10 developments during 1H:
As per the below table, selling JPY against the USD could enjoy a better risk-reward in the coming days. And we believe that the EUR suffering would be coming to an end sooner than later due to oversold RSI conditions. The floor at 1.1700 and 1.1600 is still protected- so one can anticipate a short-term rally into resistances located at 1.2000 and 1.2080 levels.
I found it for you, now see it for yourself at our subject currency Euro.
Our subject currency Euro fell 3% against the dollar in June, recorded the largest monthly fall in 37 months. If we dig at the historical data back, three years ago (June 2018), the price fell 3.20%, and now it was 3%. Interestingly the 1H of 2021 performance also matches with the June downfall of 3%. And 17-years ago (in 2004), the price fell 3.20% during the 1H.
Among the EUR crosses, EURJPY grabs our attention lately. Finally, the cross breaks the seven-month winning streak and fell -1.62% in June. Elsewhere, EURNOK is the other cross that needs attention. As noted in the previous article, the cross-tested 50MA monthly for the fourth month in a row. Since July 2013, the price manages to trade above Monthly 50MA. We will be worried if the price closes below 9.8950 weekly. In this case, 9.80 and 9.75-9.65 its 78.6-80% fibs.
EURUSD historical price action during the first half of the year
Finding ways to power EUR bulls
Coming to the macro side, growth and vaccine rollout differences between the Euro area and the US capping the price. However, the Euro area economy will steer up into the end of Q3 or in Q4 2021, and overall the growth will speed up in the next half compare to the beginning of the year 2021. This might minimize the downfall below 1.15 levels.
One may not forget that the International Monetary Fund predicted the Euro area economy would outpace the US in the coming year. In its latest World Economic Outlook, the IMF projected that the EA economy is seen expanding to 3.8% vs. 3.5% in the United States.
And also, the PEPP taper talk is the other event to watch closely in late Q3. Until such time, range-bound trading is the only option we have. As we noted in our previous article, around 1.16, the EURUSD could change the trend.
Besides, last week’s US NFP data signaled the US economy is coming back at full speed. Especially revising May numbers supporting the economy is coming back with loads of surprises. Before taking USD positions either sell or buy, we suggest traders wait for FOMC minutes due this Wednesday.
Support exists at 1.1800-1.1770 below here 1.1700 and 1.1640 exists. The daily RSI is pointing to an RSI divergence, and the oscillator has been changed to a bullish crossover signal. But the price action capped at 200MA around 1.2000. If the price continues to move higher, watch out for resistance at 1.2030 and 1.2100.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
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Feauture Image : © Josef Koudelka/ Magnum Photos/ Contrasto
