The secured greenback is in high demand as the issue surrounding China’s Evergrande resort develops and the prospect of a worldwide downturn seems more likely. Anxiety around the Fed’s announcement, as well as the upcoming German elections, are taking their toll and since then, the relatively secure Dollar has continued to gain ground, bringing the EUR/USD pair closer to 1.17. Commerzbank’s Karen Jones, Team Head of FICC Technical Analysis Research, anticipates the pairing to retest the 1.664 August mark, but she believes a minor bounce on Monday to take place.
The EUR/USD fell sharply last week, and it has already breached the 1.1752 mid-July bottom. They have unfavorable Elliott pattern numbers, as well as a sell indication on the DMI, which means there is an incline to the downside. There should be falls to the 1.1704 March drop and the 1.1664 August bottom, among other places. Notice should also be given to the 13 counts on the 240-minute chart, which suggests that a minor comeback around 1.1785 is possible today. The August low of 1.1664 protects the 200-week moving average (200-week MA) at 1.1576 as well as the preceding downtrend, which is presently at 1.1424.
EURUSD CHART. Source: Tradingview.com
From a technical standpoint, a following decline below the 1.1700 level is expected to find solid support at the YTD low points, in the area of 1.1665, which should serve as a significant critical point for investors in the coming weeks. The occurrence of certain follow-through trading will signal a new bearish collapse and pave the way for more losses. The duo may next extend its decline to target the swing lows of November 2020, which are located around the 1.1600 round-figure area. A continuation of the declining trend to interim support in the 1.1540 area and the important psychological level of 1.1500 is possible.
On the other hand, the 1.1750 region currently appears to be acting as an initial resistance level, in front of the 1.1770 and 1.1800 round figures, respectively. Brief activity may be triggered by a prolonged rise beyond the 1.1880 trading range, which would boost the pair much farther towards the next significant obstacle around the 1.1850 level inching closer to the 1.1880 demand zone. This is accompanied by the 1.1900 level, which, if passed forcefully, will effectively eliminate any near-term bearish bias in the market. The pair may then try to break above an intermediate resistance level in the 1.1935-40 area eventually accelerating towards the extremely significant 200-day simple moving average, which is located just ahead of the crucial 1.2000 psychological level.
Review of the Fundamentals
The EUR/USD pair extended its ongoing retrace down from its peak point since June 29 and fell to about 1.1700, or around a one-month downtrend, during Monday’s Asian session. The US dollar received a boost from anticipation for an eventual Fed reduction statement and received a lift from the market’s potential downside attitude. Despite evidence of reducing inflation expectations in the United States, current figures indicated that the economic recovery would continue.
Meanwhile, concerns about the rapidly spreading Delta virus, a worldwide economic downturn, and a potential disaster at indebted giant China Evergrande weighed on volatility. Investors remain anxious about China Evergrande Group’s ability to make good on Thursday’s bond interest payment of $83.5 million.