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EUR/USD plunges below 1.1260

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EUR/USD plunged on Thursday after the core CPI rose by more than anticipated in January, proving that the dip of the headline rate into negative territory is mainly due to lower oil prices. The rate fell below the key support line (turned to resistance) of 1.1260 (R1), which shifts the bias back to the downside in my view and could open the way for another test of 1.1100 (S2), defined by the low of the 26th of January. Nevertheless, in today’s agenda we have the 2nd estimate of the US GDP for Q4, which is expected to show a lower rate of economic expansion than the initial forecast. This could cause a minor bounce, perhaps for a test around 1.1260 (R1), as a resistance this time. The RSI gives me an extra reason to be careful about such a bounce. The indicator exited its oversold territory and is now pointing north. With regards to the broader trend I believe that the pair is still in a downtrend. EURUSD is printing lower peaks and lower troughs below both the 50- and the 200-day moving averages. A break below the 1.1100 (S2) line in the future could challenge our next support at 1.1025 (S3), defined by the high of the 1st of September 2003.

• Support: 1.1180 (S1), 1.1100 (S2), 1.1025 (S3).

• Resistance: 1.1260 (R1), 1.1390 (R2), 1.1450 (R3).

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