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Euro moves towards $1.24
The single currency opened lower over the weekend, but managed to recoup it losses this morning, having already made one attempt on the $1.24 level but it failed to push through it.
The euro has a lot of ground to make up if it wants to get back to the pre-Mario Draghi speech level on Friday. The European Central Bank chief’s suggestion that quantitative easing could be on the cards sent the single currency tumbling; traders don’t tend to bet against central banks.
Dealers will be scrutinising the eurozone economies for signs of low growth and deflation as soft economic indicators would add fuel to the fire and maintain a downward pressure on EUR/USD.
The final GDP reading from Germany is due out tomorrow at 7am (London time) and traders are anticipating a reading of 0.1% for the third quarter. The Germany economy contracted by 0.1% in the second quarter so if the reading is negative it could spark a new wave of selling.
On an hourly basis, EUR/USD has moved out of oversold territory, which leads me to believe any moves to the upside will be limited. If the euro moves above $1.24 the 200-hour MA of $1.2485 will be the initial target. If the important psychological mark of $1.25 is cleared, dealers will look to $1.2560. To the downside, if the overnight low of $1.2358 is punctured, $1.23 will be on traders’ radars.