EURUSD: time for a correction?
After the recent rally, the euro may be set for a bearish correction even as the dollar demand is tentative. A number of risk factors for the single currency that could derail its current bullishness and fuel a retreat from the recent highs above 1.17.
EURUSD has slipped from August high of 1.1733 earlier this week on some signs of risk-off sentiment reemergence. On Friday, Trump’s new tariff threats have fuelled risk aversion, which added to the bearish bias in the euro, though the selling pressure is still limited, despite the euro area CPI data came in lower than expected. But further on, the single currency could face some obstacles that may send the pair lower.
First, the Turkish lira crisis deepens, which could reignite worries over the European banks. So far, there are no signs of this crisis abating, so this factor may yet fuel euro weakness down the road. Second, the US-EU trade jitters back in focus after Trump rejected the EU offer to eliminate auto tariffs and called this offer "not good enough." This means that the two sides are yet to come to agreement, and this could be problematic, considering the US President’s tough position. Third, Fitch report on Italy’s ratings could increase the pressure on the euro should the agency present a lower estimate citing the country’s budget issues.
In a negative scenario, the pair may get back below the 20-DMA at 1.1540 as early as next week. In the short term, the price could challenge the 1.1650 immediate support.
EURUSD has slipped from August high of 1.1733 earlier this week on some signs of risk-off sentiment reemergence. On Friday, Trump’s new tariff threats have fuelled risk aversion, which added to the bearish bias in the euro, though the selling pressure is still limited, despite the euro area CPI data came in lower than expected. But further on, the single currency could face some obstacles that may send the pair lower.
First, the Turkish lira crisis deepens, which could reignite worries over the European banks. So far, there are no signs of this crisis abating, so this factor may yet fuel euro weakness down the road. Second, the US-EU trade jitters back in focus after Trump rejected the EU offer to eliminate auto tariffs and called this offer "not good enough." This means that the two sides are yet to come to agreement, and this could be problematic, considering the US President’s tough position. Third, Fitch report on Italy’s ratings could increase the pressure on the euro should the agency present a lower estimate citing the country’s budget issues.
In a negative scenario, the pair may get back below the 20-DMA at 1.1540 as early as next week. In the short term, the price could challenge the 1.1650 immediate support.
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