EURUSD ready to break the year-to-date lowsTrade set up This chart that simple has to be on the radar, as where price goes from here has huge implications for markets more broadly, even outside of G10 FX. Any currency pair breaking to new cycle lows is telling a clear message, so the importance of the 1.1300 level (15 August lows), which has really acted as key support since November 2016 , cannot be understated.
Why we like it Technically, price is at structural double bottom support and psychological level of 1.1300. A break of this level would open a potential for a drop towards 61.8% Fibonacci retracement of the move from January 2017 to February 2018 at 1.1200 and perhaps below.
If we want to use moving averages to blend the price action and define the trend, then we can see all short-term averages are defining a bearish trend, notably the 5-day EMA, which is containing all rallies in the recent sell-off. As long as price is holding below here the odds of a break of 1.1300 are elevated.
USD buyers could be encouraged by the recent positive ADP payrolls data and ahead of the NFP on Friday we favour further negative sentiment on EURUSD. We can also see wage growth is expected to be at 3.1% which is the highest level since early 2009. At the same time European data (ex-Germany) is hardly inspiring EUR shorts to cover and we still have Italian politics still very much in play.
The fact the USD is so over loved makes us cautious on selling EURUSD at current levels, especially if we get a weak read in the payrolls. That said, there is no denying a daily/weekly close through 1.1300 would be a powerful signal about the probability of a further move into 1.1200 and perhaps lower. A chart that is absolutely on ours and everyone’s ‘high watch’ list.
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