The Euro has taken a tumble in the last 48 hours on the charts, and for many this comes as no surprise. What is most certainly clear is that the U.S dollar is getting back into strengthening mode on the charts and this can be seen across all pairs – it almost looks dangerous to go short on the USD at present.
With the latest meeting minutes showing that the FED is looking at increasing interest rates sooner than expected, markets showed strong support for the USD. However, this is dependent on job growth as Yellen has reiterated on numerous occasions, as she looks to support the economy as it struggles out of its present hole. Nevertheless the current sentiment showed in the FED is more hawkish than dovish and this bodes well for the US dollar bulls.
Mario Draghi will also be happy with the current sentiment as the US dollar strengthening looks to push down the Euro; which has been stubbornly high despite fundamentals not backing it up. After dealing with a sluggish economy and high unemployment, it will be some reprieve to see the Euro falling on the charts. Tonight’s data from the Euro-zone will be interesting, with Manufacturing data expected to still show expansion, any miss of these targets could send the Euro plunging head on into support levels.
Current support levels can be found at 1.3173 and 1.3118, the band between these two support levels will also likely be full of liquidity and markets falling to this level may try and claw back some ground, but we will have to see some positive data from the Euro-zone to see such a thing happen.
After the recent bullish breakdown lower and the bears going to town on the EURUSD, it looks likely it will continue in the short term. Draghi offering stimulus to the markets might cause it to fall further, however, if it continues to fall Draghi might not have to take action and that suits his style more than anything else. Either way a fall in the Euro will certainly help increase the prospect of inflation in the Euro-zone a positive for markets at least.
Overall, the EURUSD is a great pair to trade at present, especially if you are on the side of the bears. There is plenty of potential for further falls, however, be wary of the support band I have highlighted as we may find some strong support and some stubborn bulls are waiting on the market to strike when they are given a chance.