EUR/USD at a year-to-date low: How low can it go?

EUR/USD is at its lowest level of 2021, but the technicals suggest that there may be more downside to come...

FOREX 4

Midway through last week, the outlook was looking up for EUR/USD bulls. The pair was probing a multi-week high near 1.2000 and the Federal Reserve had just come out with a dovish statement, suggesting that it still wasn’t looking at raising interest rates until 2024.

Since then, the outlook for the world’s most widely-traded currency pair has been flipped on its head.

Despite yesterday’s seemingly better-than-expected PMI figures out of Europe, traders are more concerned with new lockdowns and a third wave of COVID infections as the continent struggles to roll out vaccines. Meanwhile on the other side of the Atlantic, the US continues to vaccinate its population at a relatively rapid rate, and US economic data is consistently coming in above expectations. Just this morning, the US reported “only” 684k in new unemployment claims, the lowest total since the pandemic began, and revised its estimate of Q4 GDP up to 4.3% annualized, beating expectations of a 4.1% reading.

This combination of positive US and negative European news has pushed EUR/USD to a new year-to-date low below 1.1800. Notably, the pair has also broken below its 200-day exponential moving average for the first time in ten months, signaling that the longer-term bullish trend may have come to an end:

Source: StoneX, TradingView

Despite the ferocity of the selloff (over 150 pips already this week!), the pair’s RSI oscillator has yet to reach oversold territory, signaling that rates may have further to fall before finding a floor. With little in the way of previous support nearby, bears could look to target the 1.1700 handle or the 8-month lows near 1.1620 next. Only a confirmed close back above the 200-day EMA near 1.1835 would erase the pair’s near-term bearish bias.

Learn more about forex trading opportunities.


More from Forex

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.