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  • DXY looks to make its highest daily close of the year above 96.
  • European financial institutions’ exposure to Turkey makes it difficult for the euro to gather strength.
  • The eurozone  GDP figures will be watched next.

With no significant macroeconomic data releases on Monday, the TRY collapse stayed under the spotlight and markets continued to asses its potential negative impacts on the European banks and the global economic growth. The EUR/USD pair, which made a modest recovery to 1.1430 in the early NA session, failed to preserve its momentum and eased below the 1.14 mark. At the moment, the pair is moving sideways in a tight range between 1.1390 – 1.1400 and remains on track to close the day with small losses.

Commenting on the economic crisis in Turkey, Standard Chartered analysts argued that that banking-sector pressure points and monetary policy in Turkey were two key elements to watch and noted: “The Financial Times reports that the European Central Bank’s supervisory wing is looking closely at European lenders’ links with Turkey.”

Meanwhile, the greenback emerged as a preferred currency in the risk-off environment amid the strong economic expansion in the United States and the Fed’s hawkish monetary policy stance. The US Dollar Index, which recorded sharp gains in the second half of the previous week, extended its gains and touched its highest level in more than 13-months at 96.52. At the moment, the index is up 0.12% on the day at 96.40.

On Tuesday, markets could forget about the lira meltdown and focus on the preliminary GDP growth numbers from the eurozone. Analysts expect  the European economy to expand by 0.3% and 2.1% on a quarterly and yearly basis, respectively. A positive reading could help the shared currency start retracing its losses and correct its oversold readings.

Technical outlook

As mentioned above, the RSI indicator on the daily chart is staying below the 30 mark to suggest that the pair is technically oversold and sellers are likely to move to the sidelines and wait for a correction. On the upside, resistances could be seen at 1.1430 (daily high), 1.1500 (psychological level) and 1.1600 (20-DMA). On the downside, supports are located at 1.1315 (Jul. 5 low), 1.1200 (psychological level) and 1.1120 (Jun. 20, 2017, low).