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EURUSD Negative Momentum Building, Looking to Break Crucial Support

EURUSD Negative Momentum Building, Looking to Break Crucial Support

Justin McQueen, Strategist

EUR Analysis and Talking Points

  • EUR Bears Maintain Pressure on Spot Price, Eyes on YTD Low
  • German Factory Orders Falls Most Since Jan’17, However, Investor Confidence Bounces Back

See our Q3 EUR forecast to learn what will drive the currency through the quarter.

EUR Bears Maintain Pressure on Spot Price

EURUSD saw a close below 1.1575, which now opens up a potential move towards the 2018 low (1.1508). Alongside this, the 12-day momentum remains negative, consequently reinforcing the bearish sentiment in the pair, while trend signals are also moving lower. Bids at 1.1550 has curbed further selling in the spot rate, however, as the price continues to dip, demand for Euro puts (protection against further declines) have increased.

EURUSD PRICE CHART: Daily Time-Frame (April-August 2018)

EURUSD Negative Momentum Building, Looking to Break Crucial Support

Chart by IG

EURUSD Technical Levels

Resistance 1: 1.1575 (Resistance Area)

Resistance 2: 1.1590 (23.6% Fibonacci Retracement)

Resistance 3: 1.1650 (Psychological Level)

Support 1: 1.1550 (Psychological Level)

Support 2: 1.1508 (YTD Low)

Soft German Factory Orders Yet Again

Another set of soft German factory orders with the figures missing expectations for the fifth time in the past six months. The headline reading fell sharply lower by 4%, expectations were for a slight dip of -0.4%, while this also marks the largest fall since January 2017. However, these figures are for June which is slightly outdated given that this was prior to Trump’s and Juncker’s agreement to refrain from imposing auto tariffs.

Investor Morale Bounces on Easing US-EU Trade Tensions

Eurozone Sentix Investor Confidence rose for the second consecutive month to 14.7 in August, which came ahead of expectations of 13.5 as concerns of a full-blown trade war between the US and EU had eased. Largely this was due to the aforementioned agreement between Trump and Juncker, consequently, the sub-index measuring future expectations had improved, however, does remain in negative territory. Sentix stated that Germany, whose auto industry has the most to lose from US auto tariffs, is the biggest winner from easing trade tension, which has been reflected in the index for Germany, showing a bounce back in August to hit the highest level since May.

BACKGROUND ON TRADE WARS

US China Trade War & a Brief History of Trade Wars – 1900 until Present

The Impact of Tariffs and Trade Wars on the US Economy and the Dollar

KEY TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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