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The 1.10 level has proven to be extremely magnetic for EUR/USD. After falling to a low of 1.0957 before the NY open, the currency pair ended the day right near this level. Today’s sell-off was driven almost entirely by Brexit concerns because Britain’s exit from the European Union would undoubtedly cause uncertainty for the Eurozone economy and volatility for European markets. However Brexit is not the only reason why euro should remain under pressure in the coming weeks. Bundesbank President Weidmann who has often resisted more stimulus from the ECB said this morning that “it is clear developments warrant stimulus review,” and “ECB policy must be powerful and effective.” While he warned that any measures mustn’t be counterproductive, it is becoming increasingly clear that one of Europe’s most influential monetary official is open to the idea of more easing.
Technically EUR/USD is trapped between two important moving averages. Above we have 1.1050, the 200-day SMA and the former resistance turned support and now resistance again. Below are the 100-day and 50-day SMAs and the first standard deviation Bollinger Bands. There’s also the 38.2% Fibonacci retracement of the August to December decline. We are looking for a downside break and when it happens given the number of hurdles EUR/USD needs to clear, it should be a significant one.