Euro Obscured By Clouds

By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

EURUSD got much cheaper last week. For instance, on February 15th the pair reached the lowest levels since November 2018. The local bottom is now at 1.1233. By the end of the week, the major currency pair reached some kind of stability, but the Euro doesn’t look too strong even though economic numbers from the U.S. weren’t very impressive.

The key reason why the Euro plunged was the European Central Bank and its representative Benoît Cœuré, who said that the slowdown in the European economy growth turned out to be more global and much worse than expected. According to his estimations, the inflation in the Area would remain weak, and that’s why one shouldn’t exclude a possibility of a new program to support the European economy.

It’s not a good signal for the Euro Area and its currency. First of all, if Cœuré is allowed to talk about this, then this issue is very important for the regulator. Secondly, the ECB only recently closed its QE program and said that the Euro Area’s economy would no longer require any support. Discussing other possible tools and mechanisms, such as TLTRO (targeted longer-term refinancing operations), indicates that the European economy is starting to experience first signs of a slowdown, which is confirmed by recent statistics. However, in reality, things may be much worse.

In this light, weak readings from the U.S., such as as December retail sales (-1.2% m/m, much worse than expected) and January Industrial Production (-0.6% m/m, neutral market expectations) were out of investors’ eye. It’s bad for the USD, but the current situation with the Euro is much worse.

From the technical point of view, EURUSD is breaking the current descending tendency in the H4 chart and starting a new correction. Why is it possible to talk about growth right now? First of all, there is a convergence on the MACD in the H4 chart. Secondly, the price has broken the resistance line of the previous two-week downtrend. As for possible targets of this correction, they may be at 1.1341 and 1.1374 (38.2% and 50.0% fibo respectively). The key support level is the low at 1.1234.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.