EUR/USD is slipping for the second consecutive day. The world’s most popular currency pair slipped to a low of 1.0656, just above the support level of 1.0650 and had bounced from there.
Earlier, the pair broke below the veteran 1.0710 level which worked perfectly well as a cushion yesterday. Further support awaits at 1.0520 and 1.0460. Previous support lines turn into resistance.
Why is this happening? Here are five reasons for the downfall:
- US dollar strength: The Donald does not talk about the US dollar, and this is a good-enough reason for the US dollar to recover, at least against some currencies. Last week, President Trump and his economic advisor Navarro were bashing other countries, including Germany, for devaluing their currencies. The lack of desire for a weaker dollar allows for a recovery.
- Dovish Draghi: The President of the European Central Bank stuck to his dovish self in his testimony in the European Parliament. While markets had already anticipated this, his words continued hurting the euro.
- French worries: In France, far-right candidate Marine Le-Pen inaugurated her campaign with a call for a referendum on “Frexit,” a French exit of the euro. It is hard to imagine the single currency without the second-largest economy and one of the cores of the core countries. She is leading the polls in the first round but is expected to be beaten in the second round by Emmanuel Macron.
- German elections: The change at the helm of the SPD, the center-left Socialists, helps them rival Angela Merkel’s CDU. Both are mainstream parties, but markets prefer the steady hands of Merkel to the inexperienced Martin Schulz. Opinion polls matter even though the elections are only due on September 24th.
- German industrial output falls: The locomotive of the euro-zone suffers is slowing, at least according to the latest data point. A drop of 3% in December was totally unexpected.
More: EUR/USD: Trading Within The ‘Uncertainty Band’ N-Term – Barclays
Here is how it looks on the euro/dollar chart:
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