EURUSD Bulls Still Have Hurdles To Clear?
Media reports on Sunday, that US President Donald Trump might seek to restrict Chinese investments in certain US industries, may have prompted a risk-off atmosphere in the Asian session but, as traders might expect, it was USDJPY that bore the brunt of the move with the pair edging lower as investors bought the JPY. That weighed on EURJPY as EURUSD traded sideways. But the question for traders in the European session is how EURUSD will react. Some might expect the EURUSD could bounce higher. Last week’s rebound from June’s current low of 1.1508 has led some technical analysts to wonder whether the EURUSD is forming a base. Analysts at IFR wrote late Friday of a possible “short-term tailwind for EURUSD gains” and that if “gains extend, [euro] bulls will have to contend with key resistance in the 1.1850/55 area where June’s high sits.” Conversely “if the short-term lift reverses and a break of 1.1500 ensues, the next leg of the longer-term bear market is likely to begin,” with IFR singling out “the July 2017 low at 1.1313 and the June 2017 low of 1.1119” as potential targets.
However, as traders begin the week with EURUSD having been becalmed in Asia in the mid-1.1650s, perhaps it’s Friday’s low of 1.1605 that some market participants might see as a support level. That said perhaps the more fundamental issue is whether traders can find enough reasons to buy the euro even if they are minded to sell the US dollar. With continuing strains among euro zone members, not to mention the negative carry, perhaps the hurdle for euro strength is still high.
Written by Neal Kimberley, External Currency Analyst.
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