EUR/USD: 1.2975The Euro dropped to below 1.3000 today, with the move triggered by poor French data that showed that business morale in the manufacturing sector had fallen to a 2 year low.
Further pressure was added through ongoing concern over the possibility of a global economic slowdown after a string of poor US earnings data and a spike in Spanish borrowing costs after Moody's downgraded the credit ratings of 5 Spanish regions.
Equities markets all had a tough day with the S+P -1.45%, while in Europe the Dax closed down 2.1% and the FTSE -1.44%
The Euro looks as though it could face further pressure ahead today and the market will be closely watching the data, due out later, when the EU PMI data and the German IFO Business Climate Index is released. It could be a busy session as Mario Draghi, the ECB president will be in Germany to speak to the German parliament to justify the ECB's proposed bond buying programme, so we can expect some sort of statement from there, and later in the day we get the FOMC Interest rate decision, although no change is expected.
So the Euro, currently at 1.2970, has been down to 1.2951 but remains above minor Fibo support at 1.2945 (61.8% of 1.2825/1.3139), a break of which would see declines towards 1.2900 (76.4%). Below here would suggest a test of the rising trendline, currently at 1.2885, which should be strong, but a break would take us to the 200DMA, now at 1.2830, which has held pretty well recently, above the 1 Oct low at 1.2802.
The topside will now see sellers at 1.3000 and back above here towards today’s 1.3074 high. 1.3100 is where the long term descending trendline now lies and should prove strong, but a break would see the 17 Oct, 1.3140 high, which is also 38.2% of 1.4939/1.2042. A break of this would see a return towards the 17 Sept 1.3171 high and then to 1.3266,1.3368 and 1.3480, all of which acted as tops between February and April, although it looks unlikely that they will come under pressure this week.
The 4 hour indicators are beginning to point lower and further downside pressure looks likely, with rallies toward 1.3000 appearing likely to attract sellers looking for the next leg lower. Overall though, I suspect that we need to respect the converging trendlines, so I would be looking to reduce positions if/when we approach the base at around 1.2875.
