EUR/USD Falls To Low Support – 4 Reasons

EUR/USD continues grinding lower and is already 400 pips below the highs of 1.1375 seen not too long ago. The low point has been 1.0957, around the swing high seen in late January, before the US dollar collapsed.

What is behind this fall?

Not so good German figures: Retail sales look weak, producer prices continue falling and business confidence is falling. The latest blow came from IFO, Germany’s No. 1 Think Tank. If you are trading the euro as the heir of the Deutschmark, the direction is down.

Growing speculation about ECB action: We are hearing not-so-hawkish words from the hawkish members of the ECB, from northern countries and from Germany. This includes Bundesbank President Jens Weidmann, who acknowledges deteriorating inflation expectations.

Improving US figures: During December and January, data coming out of the US was a series of disappointments. The fortunes have changed lately, with better than expected data from a variety of sectors: retail sales, jobless claims and also housing. Another test awaits the greenback: see how to trade the new home sales).

Brexit implications: The big story of the week is the pound, with growing chances of a Brexit given the support it gets from the influential mayor of London Boris Johnson. If the UK leaves the EU, the EU is also left without the UK and this could also have a negative impact on the euro.

Here is how it looks on the chart. Support awaits at 1.0950, followed by 1.0880, 1.08 and 1.0710. Resistance awaits at 1.10 with a much stronger barrier at 1.1070.