EURUSD Wilts Again On Stronger Dollar, German Trade Misses Don’t Help

EUR/USD Main Talking Points:

• EUR/USD starts the week with more falls
• The pair has already slid for four straight weeks
• Dollar strength looks set to dominate trade for some time

The Euro made a new low against the United States Dollar for this young year to date on Monday as the unwinding of early interest-rate cut bets continues to boost the greenback.

The markets’ response to last week’s astonishing strength in US job creation is reverberating around global asset classes once more, with any chance of a reduction in borrowing costs from the Federal Reserve in March all-but ruled out.

In European action this has seen both the Euro and Sterling hit multi-week lows against the Dollar and, in a week that’s comparatively light for likely market moving data, the Dollar-strength theme is likely to stick.

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Germany’s trade numbers were released earlier on Monday and probably added to the Euro’s problems. While the overall trade balance did improve in December, both imports and exports fell more than economists expected. Exports were down 4.6% on the month, much worse than the 2% fall predicted. Imports slid by nearly 7%.

The eurozone’s traditional powerhouse economy endured a rocky start to 2024, with farmers’ protests and train drivers’ strikes underlining workers’ discontent. The trade numbers will do little to reassure those worried that recession is closing in.

Data such as this will only shore up suspicions that the European Central Bank can’t be far from cutting its own interest rates, with market focus now on a reduction in April, assuming inflation’s grip continues to relax.

EUR/USD Technical Analysis

EUR/USD Daily Chart Compiled Using TradingView

EUR/USD has now chalked up four successive weeks of falls with both the technical and fundamental pictures combining to weigh on the single currency.

The Euro is now back within a trading band last seen between December 1 and 13. It is bounded at the top by December 5’s intraday high of 1.08490 and December 8’s low of 1.07207. The latter level now offers near term support, with November 14’s intraday low of 1.06916 beckoning should it break, and guarding the way lower to October 3’s one-year lows.

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Still, while things clearly aren’t looking great for battered Euro bulls, there may be some hope of respite if only in the speed of recent declines. The pair’s 200-day moving average gave way on February 2 and the market remains below that level as of Monday.

The pair’s Relative Strength Index is unsurprisingly closing in on oversold levels. It now stands at 33.1, not far from the important 30 level which suggests that overselling has become severe.

The pair remains within a quite well-respected downtrend channel from the peaks of December 28. That channel offers resistance quite well above the market at 1.08521 and support much closer to hand at 1.06931.

–By David Cottle for DailyFX