EUR/USD reached strong support (video)
By Elizaveta Belugina
EUR/USD slid below last week’s low at $1.3575 and declined to the levels just above $1. 3500 where one can find support line of 2012-2013.
Negative background for the single currency was created by concerns about Portugal, decline in the euro zone’s industrial production and lower-than-expected ZEW economic sentiment indices for Germany and the euro area.
In America economic data were also far from very encouraging, but there were no painful contractions, only some slowdown with some bright spots like Empire State Manufacturing Index, Philly Fed Manufacturing Index ad higher-than-expected PPI. Although the US yields didn’t increase much, the European ones declined and this affected the pair.
The pair is now trading at the lower edge of the recent downward channel. Resistance is at $1.3550 and $1.3575 and the upside next week will be likely limited by $1.3600. On the weekly chart the pair eroded support of the 55-week MA which was holding the bearish pressure since the beginning of the summer and entered the Ichimoku Cloud, so there’s scope for decline to $1.3476 (2014 low and lower weekly Bollinger band).
At the same time, the bears have to be aware that the area of $1.3500 is the one of great psychological importance as euro was trading above here almost the whole time since early 2014. Euro has been very unwilling to give away its ground so far and it still has the fundamental factors in favor of it like big current account surplus and demand for reserves diversification. The ECB hasn’t given the market anything new either, while US yields remain too low. So, for a time being false breaks of $1.3500 for $1.3476 are possible, but although the long-term outlook is negative for euro, this level of $1.3500 won’t fail easily.