EUR/USD - 5 Reasons for Weakness
A volatile intraday session in the EUR/USD allowed for more weakness in the 17-nation currency over an intermediate term. The currency pair remains below a structured resistance of 1.4250. Since the sell-off in the Euro incurred, EUR/USD currency pair has lost as much as 5 percent.
Weakness in the Euro has been structured by a segment of events, and if continued overall weakness in the currency can further be felt. Unless, fundamental perspectives will change in a shorter term, EUR/USD could possibly test a 1.4000 level.
Weakness in the Euro has been formed by:
1) Collapse in Risk Appetite - A severe drop in commodities and higher yielding currencies suggest risk adverse market mentality.
2) Broad USD strength and Continuous take profit mentality in the Euro – Commitment of Traders showed Net short USD positions drop, Dollar Index rebounds.
3) Fears of Greek Debt restructuring along with weak support for European aid package- rumors of “soft” restructuring have been floating around the market place.
4) A lack of increase in the interest rates coming out of ECB – markets is readjusting the price to more normal levels of interest rate differentials between EU and US.
5) Weaker than anticipated economic figures out of EU – German and EU economic Sentiment fell by bigger than anticipated figures. US housing market remains in a dire state (favorable for risk aversion argument).
On technical perspectives, EUR/USD is intermediate downtrend with support hovering at a low of a recent downtrend at 1.4050. Resistance is represented as 1st Standard Deviation at 1.4250.
