Euro/dollar has been falling relentlessly, temporarily breaching the round 1.05 level and already looking to much deeper levels. But from that abyss, the pair made a remarkable turnaround and jumped all the way to 1.0642.
Yet after this impressive 150 pip rally, the pair is still more than 200 pips down on the week, and the general trend is clearly down. So, is it just a necessary correction before the next leg lower?
A pause at low support was then followed by a dip below 1.05 – the lowest since January 2003 – that’s already over 12 years. The euro existed as a physical currency only one year at the time.
Looks like a correction
Looking at other currency pairs, we see the US dollar weakening against other currencies as well: GBP/USD is re-capturing 1.50, AUD/USD is challenging resistance, etc. No economic indicators nor breaking news backs this move. It seems like a necessary correction. The clear conclusion is that profits are being taken on dollar longs.
If this is the only motive for the move, it does not change the general picture, and we could see the pair resuming its falls shortly.
US Focus
We do have some news from the US later on: weekly jobless claims are expected to show a slide to 306K. Retail sales are predicted to rise 0.3% and core sales by 0.6%. All these figures have disappointed in the previous reads, but they haven’t changed the overall USD strength.
The most important jobs report, the NFP, has been positive. And core inflation has been very stable as well at 1.6%. These are the figures that matter to the Federal Reserve.
EUR/USD
Real resistance is only at 1.0760, but 1.0685 is worth mentioning. Below, 1.0550 can be seen as weak support, but 1.05 is a more important line. The break below this level can be seen as a “fakeout” at the moment.
More: If Short EUR/USD, What To Do Now? – BNPP
Here is the chart:
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