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EURUSD Price Breaks Down as US Dollar Rides Roughshod

EURUSD Price Breaks Down as US Dollar Rides Roughshod

2019-04-25 08:35:00
Nick Cawley, Strategist

EURUSD Price, Chart and Analysis:

  • EURUSD touches at 22-month low of 1.1141.
  • EURUSD looks oversold, US dollar looks overbought.

Q2 2019 EUR Forecast and USD Top Trading Opportunities

EURUSD finally broke down late yesterday and touched a fresh 22-month low as US dollar strength took out noted EURUSD support levels. The US dollar continues to attract flows with the yield differential between 2-year US Treasuries (2.32%) and German Bunds (-0.60%) supportive of the greenback. The break lower had been expected over the last few weeks with official data pointing to a sharp economic slowdown in Germany and the Euro-Zone.

Euro Fundamental Outlook: EURUSD Crumbles on Euro-Zone Growth Fears

The US dollar is at, or close to, highs last seen nearly two years. The strength of the USD - the cleanest shirt in the laundry basket – comes despite a growing realization that the next move in US interest rates is likely lower. Central banks around the globe have been adopting a more dovish stance over the last few months as economies weaken and inflation stays stubbornly below target.

The US dollar chart is showing signs that the recent bull surge is overdone with the CCI indicator showing the greenback at extreme overbought levels in the short-term. The overall set-up however remains positive with a cluster of higher lows and higher highs seen since the start of the year.

US Dollar Basket (DXY) Daily Price Chart (June 2018 – April 25, 2019)

EURUSD Price Breaks Down as US Dollar Rides Roughshod

EURUSD is currently trading around 1.1140, the lowest level seen since late-June 2017. The next support zone is between 1.1020 and 1.1070 from mid-May 2017. The pair looks oversold in the short-term, using the CCI indicator. Coming up, two important US releases with durable goods orders later today and the first look at US Q1 GDP on Friday. Both releases have the ability to steer the US dollar in the short-term.

EURUSD Daily Price Chart (May 2018 – April 25, 2019)

EURUSD Price Breaks Down as US Dollar Rides Roughshod

Retail traders are 70.0% net-long EURUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes give us a stronger bearish contrarian bias.

We run several Trader Sentiment Webinars every week explaining how to use IG client sentiment data and positioning when looking at a trade set-up. Access the DailyFX Webinar Calendar to get all the times and links for a wide range of webinars.

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.comor via Twitter @nickcawley1.

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