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Next EUR/USD Leg Lower Begins; Trade Opportunities in EUR/AUD, EUR/GBP

Next EUR/USD Leg Lower Begins; Trade Opportunities in EUR/AUD, EUR/GBP

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- EURUSD cracks weekly low and tumbles below $1.2600.

- New EURGBP trade on the table.

- EURUSD has been on a major losing streak since mid-August.

Euro-Zone economic data came out roundly weaker than expected today, and the aftershocks have been felt throughout EUR-complex. The depth of impact stemming from the disappointing preliminary September Euro-Zone CPI may have to do with expectations for the core: +0.9% y/y was expected when +0.7% y/y was delivered. The scope of disinflation widens.

Over the next few months, Euro-Zone CPI may start to bottom. For starters, if it takes three to nine months for changes in interest rates and exchange rates to impact an economy, then the EURUSD peak in early-May is a good watermark to look back at; the window for peak drag on CPI by FX is just about now.

We maintain the intraweek chart perspective on EURUSD as such: the daily 13-EMA is our trend resistance and a break above that level (wherever it may be that day) will mark a change in the nature of price action. We're also looking at short EURGBP based on H4 technicals and a longer-term long EURAUD trade. See the video above for technical considerations.

Read more: Technical Case for Weak EUR/USD Persists - Will Fundamentals Match?

--- Written by Christopher Vecchio, Currency Strategist

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