It’s been another lacklustre week for the euro dollar as bearish sentiment continues to weigh heavily on the pair following the firm breakaway from the volume point of control on the daily chart which sent the pair tumbling through the 1.1100 area.
Last Friday’s price action gave a repeat performance taking the pair lower once again, before Monday’s very weak attempt to rally provided some hope for euro bulls with the follow through on Tuesday running into resistance in the 1.1030 area before capitulating and closing lower on the day at 1.0979. Once again in early trading we have seen the pair attempt to rise, only for the rally to be snuffed out with a test of the platform of support in the 1.0950 area now on the horizon. This was the level that duly provided support to the pair back in July following the Brexit vote, with the pair rallying to 1.1350 in due course. For any such repeat, much will depend on the FOMC, and should they fail to deliver which now seems increasingly likely, this may be the catalyst for the beleaguered euro, and for a rally in the pair with some momentum.
It is also interesting to note the associated volumes with the current move lower, as not only are they relatively low, but also falling in a falling market, and suggesting the current bearish phase may well be reaching a conclusion.
From a fundamental perspective tomorrow sees the ECB interest rate decision, and press conference from Mario Draghi which will no inject a degree of volatility to the eurodollar, and also determine whether the current support level will indeed hold. Moreover, last week also saw an increase in the net short positions at the CFTC to 93,472 contracts, which is by no means an extreme for eurodollar where in 2015 net short positions reached over 200k contracts.
By Anna Coulling
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