Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View More
EUR/USD at Multi-Decade Lows Amid Broad USD Momentum, Sterling Crisis Weighs

EUR/USD at Multi-Decade Lows Amid Broad USD Momentum, Sterling Crisis Weighs

Diego Colman, Strategist

EUR/USD OUTLOOK:

  • EUR/USD begins the week on back foot, setting a fresh multi-decade lows
  • The U.S. dollar maintains momentum as U.S. Treasury yields accelerate their advance
  • The UK currency crisis, along with negative market sentiment, is not helping riskier currencies

Trade Smarter - Sign up for the DailyFX Newsletter

Receive timely and compelling market commentary from the DailyFX team

Subscribe to Newsletter

Most Read: US Dollar Technical Analysis - Panic Driving DXY Higher into Lofty Levels

EUR/USD was sharply weaker on Monday afternoon, down about 0.8% to 0.9608 amid broad-based U.S. dollar strength, but it was trading well above its worst levels set in the overnight session when it reached ~0.9550, the lowest mark since June 2002. Although the market now expects the ECB to raise interest rates by 75 basis points at the October policy meeting, sentiment towards the euro remains overwhelmingly bearish amid growing fears that the eurozone economy may be headed for a recession.

Pessimism about the broader outlook increased after a far-right coalition, led by Giorgia Meloni's Fratelli d’Italia, secured a strong victory in Italy’s elections on Sunday. Based on the group’s political views, the next government could soon buck heads with Brussels by challenging the bloc’s fiscal rules, a situation that could raise fragmentation risks over the medium term (the Italian/German 10-year bond spread widened to 250 basis points today, the most since late July).

Disappointing data from Germany, which saw the Ifo business confidence fall to its lowest level since April 2020 this month, reinforced the view that the EU's largest economy is about to roll off the cliff, reinforcing the euro's soft tone.

EUR Forecast
EUR Forecast
Recommended by Diego Colman
Get Your Free EUR Forecast
Get My Guide

The UK currency crisis is doing little to improve the mood. GBP/USD plunged nearly 6% overnight, extending last Friday's sell-off following the Prime Minister's decision to launch a large unfunded fiscal stimulus package at a time of runaway inflation and twin deficits. Although sterling has managed to erase most of Monday's losses, the current situation is not conducive to risk-taking, creating a more favorable environment for the U.S. dollar.

Looking ahead, EUR/USD remains biased to the downside, meaning that new multi-decade lows for the exchange rate could be just around the corner, especially if U.S. Treasury yields continue to rise amid hawkish repricing of Fed rate expectations. In addition, if yields accelerate their advance, risk assets could come under heavy selling pressure, driving flight-to-safety flows. This scenario will be negative for the euro, but beneficial for the greenback.

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 7% 2% 4%
Weekly -2% -3% -2%
What does it mean for price action?
Get My Guide

EUR/USD TECHNICAL ANALYSIS

EUR/USD hit a new multi-decade low on Monday at ~0.9550, kissing channel support but failing to breach it, but with sellers firmly entrenched in the driver’s seat, it may just be a matter of time before a breakout. If the bearish scenario plays out, a move towards 0.9370 could be in the cards. On the flip side, if dip-buyers return and spark a bullish reversal, initial resistance comes in at 0.9700, followed by 0.9900 on the daily chart.

EUR/USD TECHNICAL CHART

Chart, histogram  Description automatically generated

EUR/USD Chart Prepared Using TradingView

EDUCATION TOOLS FOR TRADERS

  • Are you just getting started? Download the beginners’ guide for FX traders
  • Would you like to know more about your trading personality? Take the DailyFX quiz and find out
  • IG's client positioning data provides valuable information on market sentiment. Get your free guide on how to use this powerful trading indicator here.

---Written by Diego Colman, Market Strategist for DailyFX

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

DISCLOSURES