Is The EUR/USD Currency Pair Due For A Big Bear Move Today?
Risk-on markets fell on Thursday as increasing tensions in Ukraine spilled over into financial markets and Chinese economic data failed to meet expectations.
Chinese reports disappointed on three levels with industrial-output, investment and retail-sales growth all cooling more than expected in January and February. That comes on top of Chinese policymakers announcing last week the lowest economic growth target since 1990: 7.5%.
Meanwhile in Ukraine, there were no signs of let up from Russian military forces, who look ready to take control of the Crimean peninsula; prompting diplomatic pressure from Germany and the US Secretary of State John Kerry.
The weekend will see a referendum held in the region and promises to be a pivotal moment in the crisis, with Kerry stating that the US will take ‘serious’ steps the day after the vote, if no resolution is in sight.
Thus, by the close of play Thursday, US stocks were sharply in the red with the Dow Jones Industrial Average down -1.41%, the S&P 500 down -1.17%, and the Nasdaq down -1.46%. The falls came even after US retail sales increased for the first time in 3 months showing shoppers were willing to brave the cold winter conditions to hit the shopping malls. While in a separate report, US jobless claims also fell, indicating the continued improvement in the nation’s labor market.
In currencies, the USD dollar gained from the flight to safety and the NZD fell back following Wednesday’s 0.25% rate rise. Dollar yen also dropped back, taking the currency back below the 102 level.
EURUSD
EURUSD fell sharply yesterday as turmoil in China and Ukraine sent traders looking for safety in the US dollar and Japanese yen.
Technical levels held up quite well for traders and we saw EURUSD move through the pivot twice during the session and reverse neatly off of the second resistance mark. The currency fell back and ended by closing right on the first support.
Yesterday’s drop, in EURUSD, GBPUSD and USDJPY has some traders wondering whether this could be the turning point they have been waiting for. Traders have long been bearish all three pairs but so far, markets have failed to move as expected.
Looking forward, it would seem that it is too early to say that this is the turn. GBPUSD is still well positioned in an upward trend while USDJPY has not managed to break its previous week’s low and still trades in a range.
On the other hand, EURUSD has recently hit a downward sloping trend line (going back to 2008) after 5 weeks of consecutive gains. A quick look at open position data from forex broker Oanda also reveals a significant one-sided position has built up, with only 24.60% of current open positions short positions, and the rest longs.
The one-sidedness indicates that now would be a good time to enter a short position in EURUSD and look for a move back towards 1.36.
eurusd chart
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