The euro is in trouble

The euro is in trouble

2019-11-11 • Updated

The past week wasn’t kind to the euro. The currency fell below 1.15 versus the US dollar. What are the reasons of this decline and what lies ahead?

Let’s start with the analysis of the economic picture for the single currency. There are many negative factors:

  • Italian troubles. The European Commission said on Thursday that Italy’s 2019 budget draft is an “unprecedented” breach of EU budget rules. Investors fear the further escalation of political tensions in the euro area.
  • German weakness. Angela Markel’s hold on power in the key European economy is declining as her main allies were defeated at the regional election in Bavaria.
  • Economic alarm. The euro area’s and German ZEW economic sentiment indexes dropped sharply.
  • External risks. Trade wars may hurt European exports. Plus, the region is vulnerable to a risk of ‘hard’ Brexit.
  • Monetary policy. The European Central Bank is way behind the US central bank in normalizing its monetary policy. This puts the EUR at the disadvantage from investment point of view.

Next week there will be more turbulence for the euro:

  • Key eurozone’s nations will release manufacturing and services PMI for October on Wednesday, October 24. These figures will offer a ‘fresh’ economic info. Weak figures will have a greater impact on the euro than the positive data.
  • The ECB will meet on Thursday, October 25. The central bank will likely acknowledge Italian risks. Traders will worry that Italian crisis will affect the ECB’s policy. The market is now pricing in a smaller chance of a rate hike in September 2019 as their gaze switched to October 2019.
  • S&P Global will review Italy's credit rating on Friday, October 26. Another top agency, Moody's, plans to announce Italy's rating at the end of October.

Let’s now look at the technical side of things. EUR/USD has revisited October lows. If it attempts to recover, there will be a strong selling pressure at 1.1535/50. Below 1.1430 the next target is at 1.13 (August lows and the area of 200-week MA).

EURUSDDaily.png

Takeaway: look to sell at 1.1550 or 1.1425.

It seems that the only thing that may break this negative outlook for EUR/USD are some weak economic data from the US (core durable goods orders and advance GDP growth will come out next week) and a selloff in the USD on the fears of trade wars. Never the less, all things equal, the news from the euro area promise to be more interesting for the market in the upcoming days.

Similar

Oil: Russia-Ukraine Crisis Could Boost Oil Prices
Oil: Russia-Ukraine Crisis Could Boost Oil Prices

Crude oil futures surged on Monday due to disruptions in Russian refining capacity caused by Ukrainian drone strikes and Moscow's decision to cut output to comply with OPEC+ targets. The West Texas Intermediate (WTI) contract for May settled at $81.95 a barrel, up $1.32, while the Brent contract for May settled at $86.57 a barrel, also up $1.32. Russia instructed...

WTI and Brent React To a Key Pivot
WTI and Brent React To a Key Pivot

Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...

How Will China’s Regulation Affect Oil?
How Will China’s Regulation Affect Oil?

China has issued new oil product export quotas to allow oil companies to send surplus barrels overseas, particularly Sinopec, which has the highest volume among quota holders. While the exact quota volume remains undisclosed, oil companies are forecasted to export approximately 3.5 million metric tons of clean oil products in September, a 10% increase from August.

Latest news

USD: Powell Speaks on Cutting Interest Rates
USD: Powell Speaks on Cutting Interest Rates

Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...

WTT: Currency Pairs To Trade In April
WTT: Currency Pairs To Trade In April

Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera