The Euro-to-Dollar exchange rate tumbled to a new 2021 low last week before finding its footing on an important Fibonacci retracement level from which it could attempt a recovery over the coming days, as the broader universe of risks assets stabilizes and further Euro depreciation plays out through EUR/GBP.
Euro and US Dollar Weekend Prediction
Europe’s single currency kept a brave face on and made a valiant attempt at resisting the overtures of a strengthening dollar last week. But the greenback’s newfound appeal to investors, combined with the sheer weight of adverse economic news emerging from Europe, proved too much for the Euro to bear.
The Euro-to-Dollar exchange rate ended the week at 1.1792 and carrying a modest intraday gain, though not before first having sustained two daily closes beneath its 200-day moving-average around 1.1864, the loss of which has stoked bearish sentiments among technical analysts.
“EUR/USD is in new lows for the year, and we are allowing for a slide into the 1.1695 to 1.1600 band,” says Karen Jones, head of technical analysis for currencies, commodities, and bonds at Commerzbank. “Rallies will find initial resistance at the 200-day ma at 1.1864 and the near-term downtrend at 1.1887.”
Europe’s vaccine procurement troubles risk seeing the continent trailing rivals in any eventual recovery and are the root of the Euro’s burgeoning run of declines. However, they’re not by any means the only factor to have undermined a EUR/USD rate that had previously risen 10% in the year to January.
“We went short EUR/USD earlier this year with a target of 1.1750. We almost got there this past week (1.1762). We keep our fingers crossed for a final move below this level in the coming week or two,” says Andreas Steno Larsen, chief FX strategist at Nordea Markets.
Doubts about whether the EU-China investment agreement will ever be ratified may have been responsible for some of EUR/USD’s declines last week, coming as it did just before IHS Markit PMI surveys suggested Europe owed much of its March manufacturing recovery to overseas demand.
China is the bloc’s second-largest trade partner and a significant market for German car manufacturers. However, tensions with the world’s second-largest economy were not the sole political or geopolitical antagonist of the Euro-Dollar rate last week. Germany’s Constitutional Court also had its voice heard again, while the U.S. Dollar strengthened in its own right.
“The euro continues to lose ground and is still doing so slowly,” says Kit Juckes, chief FX strategist at Societe Generale. “Concern about the slow pace of vaccination and a rise in infection rates completely offset any good news from economic data and have kept bond yields down, the euro under pressure. What the data do show, however, is considerable strength in the manufacturing sector, while services are lagging. No surprise in a global economic recovery.”
But despite this and by the time all was said and done on Friday, the Euro was in recovery mode, having stabilized on the 50% Fibonacci retracement of its June 2020 uptrend, which might continue to underpin the single currency in the short-term, especially if the broader universe of risk assets stabilizes this week.