Today we shall take a look at the EUR/USD currency pair. The trend of this pair turned sharply bearish last week, dropping below the strong resistance at 1.20. Currently the pair is trading at its lowest level since November, around $1.18.
The European single currency is currently weakening due to the upcoming policy meeting of the ECB and the stance that the central bank has taken regarding bond buying. Due to the recent reflation trading among investors, bond yields have increased even in Europe, which has worried the European Central Bank. Even among its most hawkish members, now there is talk about stepping up the ECB’s stimulus program to increase bond purchases and alleviate some of the strain caused by increasing yields. If such a move comes this Thursday, the euro will remain weak. But if the European Central Bank doesn’t take any action now, the losses over the last couple of days may be recovered. Though there are some important fundamentals this week (such as a revision to some GDP reports), these won’t matter much compared to the European Central Bank meeting.
As the euro weakens due to a likely softening of the ECB’s monetary policy, the dollar is strengthening due to the improving economic conditions in the United States, driving the pair further down. The latest fundamentals out of the US have been mostly positive, including a surprisingly good non-farming payrolls report last week. The hopes of a speedy economic recovery have contributed to a further increase in the yields on US Treasury bonds, which in turn is spilling over as optimism about the US dollar as well. This trend will most likely continue this week.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1924, with the price currently trading below it. The daily support levels lie at 1.1916 and 1.1907, both overcome. The daily resistances are located at 1.1933 and 1.1941. The indicators of technical analysis agree in strongly recommending a sell position today.
