EUR/USD reverses and drops below 1.1250; it the rally over?
- Euro extends decline from 7-week highs against US Dollar.
- DXY turns positive during the American session, Wall Street hold to gains.
The EUR/USD pair retreated further after being rejected from above 1.1300 and printed a fresh daily low at 1.1237. The momentum remains negative as the US Dollar recovers ground across the board.
After the release of the ADP employment report that came in significantly below expectations, the US Dollar bottomed and EUR/USD jumped to 1.1307, reaching the highest level since April 17. The Euro lost momentum and pulled back. Recently it dropped further, making a 70-pip reversal.
The rejections from above 1.1300 and the considerable retreat back below a medium-term uptrend line (1.1270) could signal that the rally of the Euro is over. A rebound back above 1.1270 could again point to further gains. As of writing, EUR/USD trades at the low at 1.1235 facing bearish pressure.
The move lower took place amid a recovery of the greenback across the board. The DXY traded at the lowest since mid-April below 97.00 and now is up for the day at 97.15. It erased losses, supported partially by the US ISM Non-Manufacturing Index report that offset some of the negative sentiment from the ADP numbers. Later today, the Fed will release the Beige Book and on Friday the NFP is due.
The key event on Thursday is likely to be the European Central Bank meeting. No change in rates is expected. “The ECB threatened to put all policy levers on the table this week, but we look for a simple announcement of generous TLTRO terms. We see risks the ECB could tweak policy rate forward guidance, however”, explained TDS analysts. Mario Draghi post-meeting press conference is also likely to create volatility around the Euro.
Technical Levels