EUR/USD: Strong Bearish Technical Signal Joins Fundamentals – BTMU

Everything goes against EUR/USD in terms of fundamentals, and now yet another technical indicator provides a bearish sign.

The team at  Bank of Tokyo-Mitsubishi explains:

Here is their view, courtesy of eFXnews:

Euro weakness has accelerated overnight after EUR/USD broke below key support at the 1.2000-level after which it declined sharply to an intra-day low 1.1864 reaching its’ lowest level since March 2006, notes Bank of Tokyo-Mitsubishi (BTMU).

“It is a strong technical signal that the euro is likely to weaken further in 2015 moving deeper into undervalued territory. Over the last decade EUR/USD has tended to bottom at around the 1.2000-level,which on this occasion appears less likely,” BYMU argues.

“The next key support level for the pair is provided by the low from November 2005 at 1.1640, after which a break below could open the door for a move towards the 1.1000-level later in 2015,” BTMU projects.

On the macro front, BTMU notes that the move lower in EUR/USD has been reinforced by building investor  expectations that the ECB will soon adopt more aggressive monetary easing perhaps as soon as at their next meeting on the 22nd January.

Along with that, BTMU also notes the euro has also been undermined by speculation that Germany is now ready to see Greece quit the euro-zone if the populist Syriza party wins this month’s snap general election and reneges on the country’s reform programme.

“In these circumstances, it is likely that the euro will remain under downward pressure in the near-term.The seasonal bias is also in favour of a lower euro. The euro has underperformed against the US dollar , on average over the last twenty years, during the first six weeks of the calendar year which appears likelyto be repeated this year,” BTMU projects.

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