Euro heavily oversold
Yesterday was a quiet day of low volumes because of the US holiday, but even with this EUR/USD was unable to eat away at any of its losses from the previous months. In the last four months EUR/USD has dropped by over 800 pips as worries over the eurozone have persisted. The inability of the German economy to continue making up for the deficit in other areas is finally beginning to show.
EUR/USD is now heavily oversold and has spent much of the last four months being oversold or flirting with it. With Thursday’s important European Central Bank interest rate decision and the comments of Mario Draghi to come, it is perhaps no wonder currency traders are pensive.
Having already fallen 800 pips a correction is due, but a break below the $1.31 level looks more likely in the short term.