EUR/USD – How Low Will it Go?

EUR/USD – How Low Will it Go?

EUR/USD – How Low Will it Go?

EUR/USD made a run for 1.10 today and ended the North American trading session right above that level at its worst levels since the end of July. The Eurozone reported positive data today with industrial production rising 1.6%, slightly more than expected. German wholesale prices also increased 0.4% vs. -0.7% last month. ECB’s Coeure said today that he sees serious concerns over the sustainability of Greek debt and he hopes that IMF would soon get on board with some sort of relief. Unfortunately movement in the Euro was not dictated by data today, but rather influenced by the German – U.S. yield spread and broad based demand for dollars. The 2 year yield spread has fallen to its lowest level in nearly 10 years. However the lower the euro falls the better it is for the economy. The recent trend of positive data should continue as the currency weakens so while a drop below 1.10 seems inevitable, we don’t expect major losses beyond that level.

Technically, 1.0950 is a very important support level for EUR/USD. Not only did the sell-off in the currency pair stop near that level in July but it is also the 61.8% Fibonacci retracement of the March 2015 to August 2015 rally. When EUR/USD breaks 1.10, we believe it should find support right above that level but in order for the downtrend to end, EURUSD needs to trade above the 100-week SMA near 1.12.

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