EURUSD: price support kicks in at 1.1720

The euro traded sharply lower on Monday, August 10. The EURUSD pair plunged 0.39% to 1.1738. The euro saw heavy selling right from the opening of the European session, and then the sell-off gathered momentum during the US session after 2 pm GMT.

The dollar traded in positive territory against most major currencies. The greenback drew support on Friday from the US jobs report, and also from the deterioration in US-China relations. The US imposed sanctions on senior officials in Hong Kong and China. In retaliation for this move, China sanctioned 11 Americans.

Today’s macro agenda (GMT+3)

  • 12:00 Germany and Eurozone – ZEW Economic Sentiment Index (August)
  • 15:15 Canada – housing starts (July)
  • 15:30 US – PPI (July) 
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Current outlook

The euro ticked up to 1.1757 in Asian trading. At the time this overview was being written, the euro was trading at 1.1734, up from an intraday low of 1.1722. Given that price action perked up one hour before the opening of the European session, our forecast for Tuesday is a move higher to 1.1778 (45th degree).

Buyers need to break through 1.1757 in order to keep the bullish trend alive, or else they risk hovering around 1.16 for the next two days. Closing of long positions in gold was seen this morning. The dollar can be expected to rally if the fixing spills over to other assets. Furthermore, if EURUSD rises faster than the forecast line, it is likely that 1.1796 will be reached under the double bottom model.

Market participants remain focused on the protracted debate over the US Covid-19 relief bill as well as coronavirus-related news and US-China relations. Congress adjourned for summer recess yesterday, but the Democrats are still pushing for an agreement in the wake of unilateral support measures taken last weekend under executive orders by the US president. How exactly this situation will play out remains a wildcard.

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