Wednesday, December 5, 2018

EUR/USD - 05 December 2018


Fundamental Highlights

The Euro drops back to the 1.1315 support level as risk sentiment suddenly shifts to the downside. Investors' sentiment shifted to the downside decreasing the demand for high beta assets and currencies such as the Euro. The sudden shift in sentiment was attributed to two main events: first, Trump initiated a series of tweets in which he threatened China with aggressive tariffs if trade talks between the US and China fail. Second, the yield curve in the US inverted to the downside after the 5 year treasury yield crossed below the 3 year treasury yield. Usually an inversion in the yield curve can signal that the economy is going to enter into a recession. For today, investors can track the performance of US equities to guide them in determining the sentiment of investors and initiate trades on the Euro. Additionally, investors need to monitor the release of the Services PMI figure from the EU, and the Services PMI figure from the US.

Technical Analysis

The Euro is currently ranging around the 1.1315 support level. Momentum has shifted to the downside as prices broke below all the three major moving averages. The next leg lower will only occur if prices break below the 1.1306 support mark, paving the way for a drop towards 1.1255.

Support: 1.1306 / 1.1255
Resistance: 1.1426 / 1.1494

Chart (H4)