EURUSD trading heavily – eyeing key 1.1750-00 zone
As of this writing, EURUSD trading on the multi-week lows just ahead of 1.1750, but the bigger downside level looks to be 1.1700, a break of which could points to the major 1.1500 zone lower.
The US dollar is not really the driver for further EURUSD weakness today, which finds the pair pushing on the top of the key 1.1750-00 area. Elsewhere, the greenback is actually lower in today’s trading against the smaller currencies as risk sentiment is attempting to stage a comeback after the zany volatility that has so far avoided much transmission into FX (i.e,, safe haven seeking in the USD and JPY). Indeed, the volatility has been almost entirely limited to the US market. Rather, it is euro weakness in the driver’s seat and one of the factors weighing may be the sudden injection of volatility into sterling since yesterday on Boris Johnson’s aggressive stance on Brexit. A hard Brexit will certainly affect the EU’s economic fortunes as well, so it is certainly fair to discount the euro as long as hard exit fears prevail. Still, there is little real fear priced in here at current levels and not just in EURUSD: if we have a look over at EURJPY, it hasn’t yet even mustered a break through the key 124.50 area.
EURUSD is trading heavily here and looks ready to explore the rest of the pivot zone into 1.1700 ahead of tomorrow’s ECB meeting. The hurdle is rather high for Lagarde and company to surprise on the dovish side, but if the ECB wants the EUR lower (as we all know it does after chief economist Lane took the opportunity to rhetorically intervene right as EURUSD briefly breached 1.2000), it could get some help from a market that has been caught complacent on the risks to not just sterling, but also to the euro, even if to a lesser extent, from hard Brexit risks.