The avalanche continues and for good reasons. EUR/USD broke below the round number of 1.10 and is trading at yet a new 11 year low. These levels were last seen early in the previous decade.
The main driver is simply monetary policy divergence. The ECB is beginning its QE program, with Draghi explaining the implementation, and the Fed is about to tighten.
Draghi had quite a few things to say. Here are 6 takeaways from the ECB and an assessment that it was a bearish statement.
In recent days, there has been more evidence of the upcoming move from the Fed: Janet Yellen has paved the road for a removal for forward guidance, and hints towards tomorrow’s Non-Farm Payrolls imply a stronger than expected figure.
And here is the full preview: See how to trade the Non Farm Payrolls with EUR/USD.
The markets are totally ignoring positive euro-zone data. Specifically today, even that did not help, with German factory orders plunging.
The pair traded in range throughout most of February, and leaned lwoer towards the end of the month. An initial move lower expanded to break below 1.11 which then saw a second leg lower.
We are now seeing the next move. So far, joining the downhill ride was pretty straightforward: a pause followed every fall, and this was followed by a subsequent “dead cat bounce” and another fall.
But with this breach of 1.10, could we see a significant bounce back? Or is this indeed an avalanche that is not set to stop anytime soon?
Opinion:
- Eurozone fundamentals improving, eventually EUR should follow
- Get Ready For The Next Leg Lower In EUR/USD Coming Weeks
The low so far is 1.0986 and the break awaits confirmation. Here is the chart:
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