This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
We are also seeing clear signs that negative deposit rates are encouraging capital to move out of Europe causing sizeable capital outflows and of course political risk is always present.
The technical picture also favours being short with a rather pronounced downtrend in play from the 16 December high. A break of this downtrend (currently seen at $1.1476) would see the pair target the 38.2% retracement of the December sell-off at $1.1659.
On a more bullish note, the MACD on the daily chart is poised to cross over the signal line, potentially portraying a change in trend, while stochastics momentum has started moving higher.
The important part now is how EUR/USD trades around downtrend resistance. However, the short and longer-term trend is lower and this naturally this needs to be respected. My preference is to wait for price to reject the downtrend and this could be the trigger for short positions. If we see a break, I would potentially be long for a move to $1.1650.