Sell Euros Near 1.0950

Sell Euros Near 1.0950

Sell Euros Near 1.0950

EUR/USD dropped to its lowest level since January on Friday. There was no specific news to justify the move but with the U.S. dollar continuing to power higher, the University of Michigan Index surprising to the upside and 1.0850 too close for comfort, traders took the currency pair through this support level easily near the end of the European trading session. EUR/USD had not seen a positive day this past week and now investors are worried that nationalism will escalate in Europe. Italy has a referendum on Senate reform on December 4th. If voters vote yes, it would allow for continued progress on an ambitious reform package but if they vote no, it could lead to political and social turmoil. Prime Minister Renzi said he would resign if the reforms were not passed. Austria also has a Presidential election 3 weeks from now and the fear that the populist far-right candidate could win in the closely fought race is growing. Most of next week’s Eurozone economic reports are second tier except for Q3 GDP and EZ inflation numbers, Mario Draghi speaks at the end of the week and as usual, his views will be market moving.

From a technical and fundamental perspective, the euro is a sell on rallies. The currency pair should bounce back to the 1.09 handle but if it retraces to the 20-day SMA near 1.0970, it would be a great opportunity to sell for a move down to this year’s low of 1.0780.

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