Is 1.12 the Bottom for EURO?

Is 1.12 the Bottom for EURO?

Is 1.12 the Bottom for EURO?

After a sharp sell-off this week EUR/USD has found support near 1.1200. The move was driven entirely by the market’s shifting expectations for Fed tightening and the hawkish comments from FOMC voter Dudley. Whether this key support is held or broken next week now depends on Eurozone data. The market’s appetite for dollars will be important but there’s not much in the way of market moving data from the U.S. whereas there are Tier 1 economic reports from the Eurozone. Compared to many of other major currencies, the decline in EUR/USD was restrained this week by the lack of key economic data and comments from European policymakers. That changes completely next week with May PMIs, ZEW, IFO and German first quarter GDP numbers scheduled for release. The ECB is in wait and see mode and the PMIs will go a long way in telling us how quickly they will ease again. The currency pair has found support at 1.12 this week and stronger numbers will confirm a bottom while soft reports could drive the pair to fresh 1 month lows.

Technically, 1.1200 is not only a round number but also the 38.2% Fibonacci retracement of the December 2015 to May 2016 rally. If this level and Thursday’s low near 1.1180 is broken, there’s still potential support at the 100-day SMA near 1.1150 and then the 200-day SMA at 1.1100. However if EUR/USD holds 1.1200, it could retrace up to the 50-day SMA near 1.1310.

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