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EURUSD Price: Multi-Month Lows Eyed on US Dollar Surge

EURUSD Price: Multi-Month Lows Eyed on US Dollar Surge

Nick Cawley, Senior Strategist
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Euro and US dollar Latest:

  • US interest rate increases are guaranteed and maybe more than previously expected.
  • Euro traders eyeing Italian government bond yields.

We have just released our Brand New Q4 Trading Forecasts including USD and EUR.

EURUSD May Re-Test August Lows Around 1.1300

The path of least resistance for EURUSD is lower with both sides of the pair contributing to the negative sentiment. The US dollar side of the pair is seeing renewed buying and strength after Wednesday’s FOMC statement showed that a few Fed members “expected that policy would need to become modestly restrictive for a time and a number judged that it would necessary to temporarily raise the federal funds rate above their assessments of its longer-run level.” In short, US interest rates expectations may need to be re-priced higher.

The US dollar basket (DXY) is currently within 50 pips of a new two-month high – 95.20 against 95.70 - and the technical outlook suggests even higher prices with the August 15 high at 96.60 the next target.

US Dollar Basket (DXY) Daily Price Chart (June 2017 – October 18, 2018)

On the other side, the ongoing Italian Budget battle with the EU will continue to keep a lid on the common-currency. Italian government bond yields will continue to move higher – with fears of further ratings downgrades around the corner – pushing Italy’s funding and debt servicing costs ever higher. If you add in Brexit concerns and ongoing worries over EU-US trade, it will be hard to justify putting the Euro on any buy lists.

DailyFX analyst Dimitri Zabelin has written an in-depth primer on Italy and the Euro:

How Will the Euro be Affected by Italian Economic Nationalism?

IG Client Sentiment Data shows how investors are currently 54.4% net-long EURUSD – a contrarian bearish signal – but recent daily and weekly positional shifts suggest that EURUSD may move higher.

EURUSD Daily Price Chart (May – October 18, 2018)

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.com or via Twitter @nickcawley1.

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

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