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EUR/USD drops on short covering in equities

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The bid tone around EUR weakened in Asia, pushing the EUR/USD pair lower to 1.1210 levels as the carry unwind came to a halt due to short covering rally in Asian equities.

    Breaks below key Fibo, Shanghai composite drop ignored

    The drop in China’s Shanghai Composite index was largely ignored by the FX markets since it was largely due to trader’s pricing-in last week’s risk aversion. Consequently, the Nikkei-led rally in other Asian indices pushed the spot below 1.1236 (38.2% of Mar low-Aug high).

    Ahead in the day, the spot could track action in the European equity markets. ECB Draghi’s speech, due later in the day, could influence the spot as well.

    EUR/USD Technical Levels

    The spot currently trades around 1.1214. The immediate hurdle at 1.1236 (38.2% of Mar low-Aug high), above which the pair could 1.13 levels. On the other side, a breakdown of 1.12 could see the spot extend the drop to 1.1088 (50% of Mar low-Aug high).
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