3 Reasons for the Drop in EUR/USD

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Euro/dollar is on the fall. The initial reaction to the mixed Non-Farm Payrolls was a move higher, but this was limited and was followed with a slide.

The move then accelerated and EUR/USD already lost one support liine. Here are three reasons for the downfall:

  1. A bright side in the Non-Farm Payrolls report: The report included a small slide in the unemployment rate to 9%, a drop in U-6 “real unemployment rate to 16.2% and most importantly significant upside revisions to the figures released in August and September, a total of above 100K. This lowers the chances of QE3.
  2. Digestion of German economic weakness: German factory orders free-fell by over 4% while a rise was expected. Final services PMI was revised to the downside –  46.4K. This included a big drop in the German figure. It’s not only peripheral countries that are suffering. The digestion of these figures was held back until the NFP.
  3. Italy struggling at the G-20 Summit: The only significant headline coming out of the G-20 summit in Cannes is that Italy “asked” for  an IMF mission, putting the euro-zone’s third largest country together with Greece, Ireland and Portugal. This reflects the severity of the situation. And in Italy, there is a political mess which is very serious – not as exciting as in Greece, but far more dangerous.

EUR/USD is now plunging well below the 1.38 line and is approaching 1.3750. Minor support is at 1.3725, followed by significant support at 1.3650.

For more on the pair, see the euro to dollar forecast.

Update: EUR/USD extends falls and attacks the support line at 1.3725 after Italy’s prime minister Silvio Berlusconi announced that he rejects any IMF involvement.

Gregor Horvat has an excellent technical analysis of the euro weakness even before the NFP release.

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About Author

Grega Horvat Grega is based in Slovenia and has been involved in markets since 2003. He is the owner of Ew-Forecast, but before that he was working for Capital Forex Group and TheLFB.com. His feature articles have been published on FXstreet.com, Thestreet.com, Action forex, Forex TV, Istockanalyst, ForexFactory, Fxtraders.eu, Insidefutures.com, etc. He recently won the award on FXStreet.com for Best Forex Analysis in 2016. At Ew-forecast he helps clients and educates them about the Elliott wave principle and how to label and track unfolding patterns in real time. His approach to the markets is mainly technical. He uses a lot of different methods when analyzing the markets such as candlestick patterns, MA, technical indicators etc. His specialty, however, is Elliott Wave Theory which could be very helpful especially if you know how to use it in combination with other tools/indicators. EW-Forecast To be involved in the market effectively, you need the right guidance and resources, and our team can help you to achieve that. Our team is providing advanced informations about Elliott Wave theory in real time. The Elliott Wave Principle gives you a method for identifying the behavior of the markets and at what points the market is most likely to turn. We help new traders who are interested in Elliott Wave theory to understand it correctly. We are doing our best to explain our views as simple as possible with educational goal, because knowledge itself is power!

5 Comments

  1. Pingback: EUR/USD Outlook – Oct. 31 – Nov. 4 | Forex Crunch

  2. If NFP is good, stockmarkets have a reason to fly. If factory orders for September were bad, it is likely that we see a bounce in the October data. And the PIG-s are helped by the lower interest rate, thereby have change to improve. Conclusion: just the opposite of what you predict.

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