Yesterday the EURUSD currency pair rose above the important level of 1.1 for the first time since mid-August. Despite the dollar sellers' persistence, the pair failed to consolidate at the new heights. During today's trading, the price returned below the 1.1 level, indicating that the bulls are not ready to continue the upward movement without some pullback. The technical prerequisites for a correction are almost formed, and the fundamental picture for the euro is not quite optimistic.
Several teams of analysts doubted the reasoning behind the current growth of the euro against the dollar. Among them are representatives of ING Bank NV, JPMorgan Chase & Co. and Societe Generale SA. Francesco Pesole, ING currency strategist, considers that the reason for the strong increase in quotes is solely the weakening of the dollar. At the same time, the euro still does not have enough support factors, so the EURUSD downward movement may be similarly strong in case of the American currency reversal.
Pesole is expecting the quotes to drop to the 1.09 level in the coming days. Kit Juckes, chief currency strategist at Societe Generale SA, has a similar point of view. In his opinion, massive sales of dollar assets are related to the end of the month, but the trend will change as December comes. Juckes predicts a decline in EURUSD to at least 1.095.
The difficult economic situation in the EU should also not be forgotten. Speaking in the Committee on Economic and Monetary Affairs of the European Parliament, ECB President Christine Lagarde underlined the current problems and the regulator's cautious stance on monetary policy. According to Lagarde, a slowdown in employment growth in Europe is expected by the end of the year, which should put additional pressure on inflation. There is no talk of raising interest rates.
On the daily chart of EURUSD, the RSI indicator is very close to the overbought zone. A reversal signal may soon appear, indicating a further decline in quotes. The bears should pay attention to the 23.6% Fibonacci level (1.088) as the nearest correction target. To increase the security of the trade, it is possible to close the position a little earlier at the level of 1.09.
Consider the following trading strategy:
Sell EURUSD not above the 1.1 level. Take profit – 1.09. Stop loss – 1.105.
This content is for informational purposes only and is not intended to be investing advice.
