The euro closed in the red on February 13, extending the downfall to the weakest levels across the board on account of sparse economic data and coronavirus fears. The major EURSUD closed to the lowest level since May 2017, and the cross EURGBP closed below 0.8300, and EURJPY at 119.00 and finally EURCHF at 1.0615 lowest level since February 2012.
Technically speaking, the daily and weekly charts are promising further euro downfall from here too. Traders are pricing a fresh action, hopefully, a rate cut by ECB in March meeting or later of the year. A rate cut could push the euro much lower against GBP, USD, and NZD. GBP remains supported following Fiscal stimulus, and NZD is gaining strength after this week’s RBNZ neutral outlook.
Turning to safe havens, we keep the focus on the cross EURJPY and EURCHF. Usually, CHF outperforms when EUR underperforms. Now the EURCHF is trading below the Brexit low. At the time of writing, the cross is trading at 1.0615, which is below the Brexit low of 1.0625. The key support is placed at 1.0600 (psychological support).
Picture shows a million words:
A final breakdown and close below could blow the cross further towards 1.0350 and 1.0235 levels. We could expect a v-shaped recovery in case of a better euro economic data and easing fears on Chinese growth. However, we don’t this type of recovery anytime sooner.
Here is the gist of analysts who commented on the euro’s downfall.
John Authers at Bloomberg said, “There is no one single factor behind the decline, but rather an overwhelming combination of circumstances that is pushing the currency lower.” He highlighted three factors that are hurting the common currency.
- Politics 2. Manufacturing sector. 3. A slowdown in the Chinese economy.
Matthew Rocco and Anna Gross at FT cited, “Coronavirus fears have dragged on the euro.”
Analysts at Danske Bank said, “The euro area remains a region of low growth, accompanied by weak inflation dynamics and our baseline is for a continued relative underperformance of European financial assets. In contrast, a host of tailwinds are supporting USD denominated assets, and the dollar has been gaining ground since early January.”
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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