EUR/USD – Top in Place?

EUR/USD – Top in Place?

EUR/USD – Top in Place?

After an extended uptrend that has lasted for more than 3 weeks, the EUR/USD has finally closed below the first standard deviation Bollinger Band. On a technical basis, this signals that the currency pair has seen a top. EUR/USD has broken below the 23.6% Fibonacci retracement of the 2014 to 2015 decline and is below the 100- week SMA which signals potential for a deeper correction. Short term support comes in at the 100-day SMA near 1.1225 but we expect that level to be broken. We only need to be worried about a significant reversal if EUR/USD exceeds the August high of 1.1370.

Fundamentally, there were no revisions to second quarter German GDP numbers but exports and imports were slightly stronger. Earlier this week we learned that manufacturing and service sector activity in the Eurozone’s largest economy slowed during the month of August. This does not bode well for tomorrow’s IFO report. The deterioration in growth should lead to weaker business confidence, which should translate into further losses for EUR/USD.

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