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All eyes on $1.35 in EUR/USD
The $1.35 level hove back into view yesterday, pushed down by dollar strength following Janet Yellen’s comments. German data of late has been disappointing, and the deflation fighting noises from the European Central Bank have given weight to the view that the central bank is sailing towards quantitative easing, in a bid to jump-start the eurozone economy.
There are still fundamental factors supporting the euro, such as the continuing decline in US treasury yields. It stubbornly refuses to move higher despite the gradual withdrawal of monetary stimulus, and a gradual diversification of currency reserves by countries around the world. A number of nations have shifted some reserves away from the US dollar, and the euro is one of their destinations.
All eyes are on $1.35 in EUR/USD, with a break below here opening the way to the $1.34 level, last seen in mid-November 2013. However, given the fundamental factors, such a move should be approached with caution.
Negative factors, such as a declining daily relative strength index and a fresh turn lower for the moving average convergence/divergence after a June bounce, suggest that more losses are in order for EUR/USD. Resistance on the upside would come into play around the 50-daily moving average and then $1.37.