EURUSD bulls fail to hold above 1.1800 – 1.1600 here we go again?
After EURUSD pushed back above 1.1800, the currency pair failed to stabilise above it.
While one reason could be the ongoing and tedious discussions around an economic relief package between Democrats and Republicans, the driving factor behind drops lower in the first half of this week of trading was certainly the US inflation data on Tuesday.
US core inflation came in at 1.7%, slightly below the market consensus of 1.8%, helping the US-Dollar catch a bid, most likely due to diminishing optimism of a short-term drop in real US yields back below -1%.
When taking a step back, we are still considering mid-term long engagements favourable in EURUSD, seeing the currency pair with upside potential significantly above 1.2000 in the next 6 to 12 months.
This is because the overall US economic outlook leaves Republicans and Democrats with no other choice than to deliver a much needed Corona relief package, financed with freshly printed US-Dollar from the US central bank FED, which will, thus, weaken the US-Dollar.
Given the still extended net-long exposure in EuroFX futures, long engagements in EURUSD should nevertheless be taken cautiously since such a long bias makes the Euro vulnerable to ECB easing talks at the ECB meeting on the 29th of October (and probably even earlier).
Here's our take:
- Technically the key level on the downside can be found at around 1.1600
- A push below would probably be initiated by some dovish ECB rhetoric, which would activate the region around a potential mid-term long-trigger of 1.1450/1500.
Should such a push lower not happen:
- The USD would start to weaken again (probably due to weak US Retail Sales data today)
- A push back above 1.1830 would activate 1.1900 on the upside
This could take it above the current yearly highs at around 1.2000:
In 2015, the value of the EURUSD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, in 2018, it fell by 4.4%, and in 2019, it fell by 2.2%, meaning that in five years, it was down by 7.3%.
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