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Euro falls sharply in Asian trading

All major currencies ended the week lower. The largest drop against the US dollar was shown by the Australian dollar (-1.36%) and the Canadian dollar (-1.28%). Smaller declines were recorded by the euro (-0.59%), the New Zealand dollar (-0.57%), the Swiss franc (-0.37%), the Japanese yen (-0.17%), and the British pound (-0.16%).

Trading in the EURUSD pair ended in decline on Friday, September 10. The euro fell 0.13% to 1.1808. The single currency started to lose ground last Monday and remained under pressure until Friday’s close. At the outset of the European session, price action increased to 1.1851, then headed south under pressure from crosses.

Pressure on major currencies gained momentum during the North American trading session after US PPI came out. Producer prices rose sharply in August, indicating that high inflation is likely to persist for some time, with supply chains remaining tight as the COVID-19 pandemic drags on.

Major US equity benchmarks shed nearly 1% as inflationary concerns, heightened by the August PPI report, clouded hopes that tensions will ease between the US and China.

Market sentiment was also impacted by comments from Cleveland Fed President Loretta Mester that she would still like the US central bank to start tapering asset purchases at some point this year, despite weak August employment data. Mester also noted that she sees upside risks to the inflation forecast and expects inflation to remain high this year but moderate next year.

Today’s macro agenda (GMT+3)

  • 12:00 ECB Executive Board member Shnabel speech
  • 14:00 OPEC monthly oil market report
  • 16:30 ECB President Lagarde speech
  • 21:00 US: federal budget change (August)

Current outlook

At the beginning of the new week, the dollar regained its footing against global peers as Fed speakers keep pushing for QE tapering. The dollar index rose to 92.81, while the US 10-year Treasury yield widened to 1.346%.

US CPI data on Tuesday is the key event of the day and the week, which should provide a clue about the Fed's decision at its next meeting on September 21-22. A softer reading would ease pressure on risk trading and slightly undermine the dollar's bullish trend.

Erratic gyrations can be expected ahead of the FOMC meeting amid ongoing uncertainty.

Technical analysis

By the time of writing, major currencies showed mixed performance. Following a pullback, the loonie (+0.20%) and the aussie (+0.10%) saw gains. Sellers breached the 1.1795-1.1800 support zone. After a technical breakout, it will not be easy for buyers to turn around their bearish sentiment. The euro and pound remain on the back foot ahead of tomorrow's US CPI report.

EURUSD sellers have targeted 1.1769 (67-degree angle of the Gann fan). After that, the decline will accelerate to 1.1750. The 1.1783 low of August 30 provides temporary support. Breached supports at 1.1808 and 1.1795 act as resistance levels for buyers.

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