EUR/USD made a clear and strong break out and fell below the support line. This comes on the background of a drop in the ZEW Economic Sentiment among other concerns: the credit crunch is far from over. The more important support line is getting very close.
EUR/USD, the world’s most popular pair, now trades at 1.4530, falling from the area of 1.4650 in which it traded earlier in the day. The 1.4625 support line supported the pair up to now. The free fall doesn’t seem over yet.
The breakout began a little before the news: the all-European ZEW economic sentiment fell from 51.8 to 48 points. This isn’t only lower than than last month. It’s also lower than the early expectations of a fall to 50.9. This continues the trouble for the Euro from last week.
Also the German ZEW economic sentiment fell, but it was a smaller fall. It fell from 51.1 to 50.4. This was within the early expectations.
EUR/USD already began the fall before the release. There is a chance that the outcome was already leaked to some significant players in the market.
Another explanation is that the there are new concerns about the credit crisis in Dubai. While the immediate bonds were paid by neighboring Abu Dhabi, there is a dark cloud above further bond payments. The outbreak of the Dubai crisis already hurt EUR/USD during Thanksgiving.
The next big target for EUR/USD is the range of 1.4444 – 1.4480. The resistance line during the summer was 1.4444, and after the pair broke it, the support line was 1.4480 – EUR/USD didn’t go below this point.
For more on the events for the Euro this week, read the EUR/USD forecast.
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