EUR/USD: Bears back in control, 2016 lows on sight?

Dhwani Mehta FXStreet

The EUR/USD pair extends its consolidative mode near multi-year lows, now pushing the rate back below 1.04 handle amid resurgent USD demand across the board, as risk-on returns to markets.

EUR/USD breaches 1.0400 again, what next?

Currently, EUR/USD inches -0.05% lower to trade near daily lows of 1.0390, having failed to sustain the recovery above 1.04 handle. The main currency pair attempted a brief recovery in the early Asian hours, but lost steam over the last hours as a renewed risk-on wave gripped markets after the BOJ upgraded its economic assessment in wake of stronger exports.

Amid a better risk sentiment, the euro tends to lose its shine as a funding currency, while the US dollar (risk currency) gets a boost against its main competitors.

From a wider perspective, divergent monetary policy outlooks between the Fed and ECB also continue to keep the bearish pressure intact on the major, with the bears now targeting 14-year lows struck last week at 1.0366 levels.

Next of relevance for the major remains the German PPI and Eurozone current account data, while the US economic docket remains data-dry today.

EUR/USD Technical Levels

In terms of technicals, the pair finds the immediate resistance 1.0418/22 (daily high/ 5-DMA). A break beyond the last, doors will open for a test of 1.0458 (daily R1) and from there to 1.0500 (round figure). On the flip side, the immediate support is placed at 1.0366 (yearly/ 14-yr lows) below which 1.0335 (daily S2) and 1.0300 (key support) could be tested.

Sell 94%

Buy 6%

Avg Sell Price 1.0653

Avg Buy Price 1.0540

Liquidity Distribution

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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