Euro oversold, but this is far from a final sell-off
(Alexander Kuptsikevich – FxPro Financial Services Limited)
The single currency fell to 1.0071 in the early European session on Friday. For EURUSD is a new low since December 2002 and a continuation of the massive sell-off that started last Tuesday.
Looking solely at the technical picture, the pressure on the EURUSD intensified after touching the 50-day average last Monday – the informal resistance line for the previous 13 months. The pair has been selling after several touches of this line since late February.
The parity is in a couple of steps, and so far, it is difficult to find any reason why the Euro might not fall below this psychological level. Furthermore, although the weaker Euro is pro-inflationary, policymakers in the Eurozone may see it as a tool for boosting export competitiveness.
Although EURUSD is over-sold in the short term on the daily charts, the pair’s break away from the trend has not been anything out of the ordinary in recent months, suggesting a relatively orderly sell-off.
The RSI index has entered oversold territory at weekly and monthly intervals. Contrary to the indicator’s logic, historically, we have seen an acceleration of the sell-off and not the rebound.
The Euro remains a falling knife, which is very dangerous to catch despite seeming oversold. The current strong trend is one of those cases where it is more prudent to wait for reliable signs of a reversal and not rush to “catch the bottom”.
EURUSD does not recover sharply from such devastating falls, as it is the most liquid pair, with tens of trillions of dollars in turnover. In 2000 and 2015, it took more than two years for the EURUSD to recover above levels where it fell into oversold territory on the RSI monthly charts in a month. A reliable signal, in this case, was the divergence of the price chart and the said index.
The following important stop for the EURUSD looks like the area of 0.97, where the pair might find itself before the end of the month. However, we should not be surprised if the decline continues up to 0.85-0.87 and lasts for another 2-4 quarters.
EUR/USD: Free fall for the euro, where is the temporary bottom?
(Vasilis Tsaprounis – TopFX)
The last day of the week started with new losses for the common European currency as downward broke the level of 1,01 .
With a limited duration pause only managed to partially react yesterday , but without finally being able to defend the level of 1,02 .
Markets show they are trying to elicit some comments from European Central Bank President Christine Lagarde during the day pushing the pair close to the 1/1 level .
While the announcement about the new jobs in the United States is expected later today with particular interest .
As we reported yesterday it is evident that the market are executing ” stop loss ” orders as the breakdown of the 1,0350 level has put many investors who were in favor the euro in a difficult position .
From a technical picture , from one point of view a strong bearish channel has been created, but at the same time, several indicators show that the euro is oversold .
Despite the pressure on the euro we believe that we will see an attempt to defend the level of 1/1 and not break down during the day or if it does it will be of limited duration due to the fresh execution of ” stop loss ” orders.
Should you buy the dip? [Video]
(Giles Coghlan LLB, Lth, MA – HYCM)
Gold’s falls have been pronounced recently as key support at $1780 broke lower on Tuesday this week. These sharp falls have led some investors to ask, ‘Is gold’s dip a buying opportunity?’
Investors should be aware of the impact that inflation, yields and the USD has on gold. If you are unclear on that you can refresh yourself here with a video that outlines gold’s key drivers. The current position is that a strong USD and rising real yields look set for gold to remain pressured for now.
However, if the fundamental position changes, then traders should be aware of the strong seasonal pattern for gold.
Over the last 15 years the gold has risen 12 times between July 19 and September 3. The largest loss was over 15% on 2008. The largest gain has been 17% in 2011 and the average gain has been 3.23%.
Major trade risks: If the USD and Real yields keep moving higher, then gold can remain pressured.