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  • EUR/USD has been extending its recent bearish turn and made a fresh two-week low at 1.1597.
  • On a break of 1.1580, eyes will turn to the 1.1510/08 recent lows that guard the 200-week moving average at 1.1390.

EUR/USD has dropped to sessing lows on the back of a pop in the dollar which has taken the DXY to as high as 95.0870 within the  94.6100-95.0870 range for the day, so far.  

EUR/USD has been extending its recent bearish turn and made a fresh two-week low at 1.1597 while noting that there has also been a shift in risk reversals  that is now pricing in a greater premium for protection against EUR weakness vs. both the USD and JPY. The central bank divergence is compelling across the board when looking to the BoE, ECB and BoJ in comparison to the clear path form the Fed.  

Central bank focus, DE/US spread favours dollar advances towards 1.1508 range lows

However, there has been some speculation that the ECB is on the verge of tweaking its monetary policy, but October is the most likely date for the Bank to decide whether to claw back stimulus and consider December – The outlook for eurozone inflation is still very cloudy, and policymakers have felt that there will have  been too little data or economic progress to have been available by their Sept. 7 meeting which falls just two weeks before elections in Germany. So, the dollar leg is taking up the advantage and DE-US spreads will likely continue to give the US dollar the yield advantage.  

EUR/USD levels

analysts at Scotiabank explained that the EUR/USD is extending Tuesday’s bearish turn through the 50-day MA and testing fresh two week lows around 1.16 the figure: ” Near-term support is expected between 1.1600 and 1.1580. Resistance is expected above 1.1720.” However, on a break of 1.1580, eyes will turn to the 1.1510/08 recent lows that guard the 200-week moving average at 1.1390 while 1.1186/1.0814 comes as the 61.8% and 78.6% retracement.