Positive German business sentiment didn’t help as the US dollar’s strength is overwhelming. Positive comments from Washington as US traders return from a holiday result in a stronger dollar and a lower EUR/USD.
The pair is now tumbling down to a confluence of the uptrend support line that accompanied it for a month and the lows seen in the previous week. Will it stop here or will this turn into an avalanche?
As the chart shows, the 1.3485 line is where the clear uptrend support meets the lows seen last week. The pair is trading exactly in that sport right now.
After EUR/USD struggled to advance from consolidation, it is now falling. Further weak support can be found at 1.3450 and 1.3415, with the really strong line awaiting only at 1.3325.
The German ZEW Economic Sentiment surprised to the upside, with a score of 52.8 points instead of 49.2 expected and 49.6 last month. This small surprise was not enough.
In Washington, recent headlines were positive: the sides are getting closer to a deal that would allow an open government and a raise of the debt ceiling at least until the end of the year. While the deal isn’t final, the dates aren’t clear and this proposed solution isn’t long term, the growing optimism won over, as the deadline is getting closer.
According to recent calculations, the US is to hit the debt ceiling and potentially default on its debt on October 17th – just two days to go. This scary scenario has triggered worries from all over the world, and it seems that politicians are finally getting their act together, in the last moment as always.
Markets were somewhat sleepy yesterday, as traders in the US were enjoying Columbus Day. But now, all the action is back.
From here, the markets are probably awaiting new data: if the deal is indeed getting closer, the fall of EUR/USD could turn into an avalanche. It’s important to remember that the ECB is worried about the credit conditions in Europe. If there is no deal, we could see a bounce from this perfect line.
Further reading: EUR/USD weekly analysis
