EUR/USD – Where is the Top?

EUR/USD – Where is the Top?

EUR/USD – Where is the Top?

The euro extended its gains against the U.S. dollar today on the back of a falling dollar and a stronger German employment report. The currency pair moved above 1.11 for the first time since October 12th. Germany’s labor market report was much stronger than expected but the main reason for the currency’s strength is short covering and concerns about holding U.S. dollars ahead of next week’s Presidential election. Unfortunately a hawkish Fed won’t enough to strike a bottom in the U.S. dollar and take the market’s focus off the political risks. There are only 4 more trading days before one of the most dramatic U.S. Presidential elections in recent history and the race is too close to call. This means uncertainty, which is never good for currencies and in this case, the U.S. dollar. If the EUR/USD’s price action was driven by fundamentals and yield spreads alone, we would be quick to say that these are great levels to sell but politics trumps economics and that should remain true into and possibly even after November 8th if a recount is demanded.

Technically the recent rally in EUR/USD has taken the pair near some very important resistance levels. The 50% Fib retracement of the March 2015 to August 2015 rally, the 50, 100 and 200-day SMA all sit right above current levels between 1.1090 and 1.1180. So EUR/USD either fails below 1.1150 and drops back to 1.10 or it makes a run to 1.1300.

Chart Of The Day

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