The euro took a serious hit on Friday when the common currency pushed both below its 25-period and its 50-period moving average. After trading in a tight range almost all week long the EUR/USD suddenly dropped on the worsening sentiment among investors, who rushed to shed their holdings in the common currency the minute some negative news came from Europe. By contrast, the currency pair moved in tight range all week long despite the rally we saw in the stocks. We even tried to break above the 1.2300 resistance level several time, but all of them proved to be unsuccessful. On Friday the euro trended lower all day long, finishing slightly above the lows of 1.2141 for the session. As the sell-off in risky assets extended on Monday, mainly due to growing skepticism among investors, we saw the selling pressure in the euro intensifies, pushing it to fresh new lows against its U.S. counterpart. The common currency was trading as low as 1.2065 at one point during the session, before paring some of its losses and finishing the day at 1.2123. Today we are seeing yet another push into negative territory, which came after market participants continued to close their long positions in high-yielding assets and rushed to buy lower-yielding ones. Moreover, the PMI data for the Eurozone disappointed. All figures for the manufacturing and the services sectors came in lower than expected, safe for the French Flash Services PMI, which surprised on the upside and even pushed above the key 50 level, indicating that the sector is expanding. At the same time, the German Flash Services PMI moved below 50 for the first time since July 2009, indicating that the sector is contracting. After the news were announced the euro declined, but the drop was not very sharp as the currency is currently trading very close to the 1.2100 level, which is providing some support against the selling.
The lows we saw in the EUR/USD on Monday are the lowest levels the currency pair has traded on since July 2010. This is important from a technical perspective as the bulls are now on their toes and if the downward movement continues we might even see it even intensifying as some investors with big long positions might start unloading them. Technically speaking, support in the currency pair is provided by the 1.2100 level, but if we manage to break sustainably below it, the next stop will be at 1.2000. Resistance, on the other hand, stands at the 25-period moving average around 1.2188. Oscillators are all trending lower with the relative strength index at 34 and the stochastic already in oversold territory, standing at 24. The MACD is approaching the lows it touched in the first half of the month, but it still has some room to go.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.