EUR/USD – The 1.08 Level is Key

EUR/USD – The 1.08 Level is Key

EUR/USD – The 1.08 Level is Key

Nearly all of the major currencies are trading lower versus the U.S. dollar today including the euro but an upward revision to Eurozone PMIs helped euro stave off deeper losses. EUR/USD traded as low as 1.0781 but bounced back above 1.08, an important support level as the selling eased. Tomorrow’s labor market report from Germany should also help the currency because according to the PMIs there was strong job growth in the manufacturing and service sectors. While fundamental forces still point to a weaker euro, strong U.S. data or weak Eurozone data is needed to push the pair significantly lower. On a day when AUD/USD is down 1.3%, EUR/USD is down a mere 0.25% and this goes to show how sensitive the market is to data. Monetary divergence signals a lower EUR/USD but unless data supports the move, investors will be skeptical of adding to this crowded trade.

Technically, we don’t think it’s a coincidence that EUR/USD is unable to break 1.08. This level has been support for the past month and today’s attempt to break below it backfired. Whats more important however is that EUR/USD is also above the 50-day SMA. We’ve been watching the pair trade between the 100/200-day SMA cross and the 50-day SMA for a few weeks now and we need to see a convincing close below today’s low for the EUR/USD to make a run for its December lows. Until then, a ounce back above 1.09 appears more likely.

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