Euro Fundamental Backdrop

The euro found some support this Tuesday after a poor performance against the greenback yesterday. The euro remains vulnerable to downside risk as fundamental headwinds significantly outweigh any sort of positivity at the moment as the eurozone heads into the winter months. From my perspective, markets are looking for a change in the Fed’s current stance (hawkish) or a marked reduction in inflationary pressures to change the tide for EUR/USD. Until then, I expect the euro to stay depressed.

The economic calendar is fairly light from European perspective although central bank speakers from both the U.S. and ECB will be under the spotlight throughout the day. High impact economic data events will come from U.S. durable goods orders and consumer confidence for August and September respectively.

EUR/USD Economic Calendar 

(Click on image to enlarge)

Source: DailyFX economic calendar

Technical Analysis

EUR/USD Daily Chart

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Daily EUR/USD price action shows bears unable to close below the September 2002 swing low at 0.9601 which is key to opening up the 0.9500 psychological support zone. Should euro bulls defend this swing low, we may see a pullback towards 0.9800 in the interim. Coupled with an oversold Relative Strength Index (RSI), some euro reprieve seems likely short-term.

Resistance levels:

• 0.9854
• 0.9685

Support levels:

• 0.9601 (September 2002 swing low)
• 0.9500

IG Client Sentiment Data: Mixed

IGCS shows retail traders are currently LONG on EUR/USD, with 75% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we favor a short-term cautious disposition.

More By This Author: