EUR/USD Hits A 34-Month Low On Renewed Dollar Demand

EUR/USD has fallen to the lowest levels seen since April 2017 on the continuous investors’ demand for the dollar. The political uncertainty in Germany isn’t helping the EUR bulls at all, as the EUR/USD eyes levels below $1.08 next.

Fundamental analysis: Upbeat US data and German political uncertainty drags on EUR/USD

This week has witnessed more positive data from the United States. Jobless claims beat analysts’ forecasts while the CPI figures signal slight improvement in inflation with the core annual inflation reported at 2.3%, higher than the expected 2.2%.

The German CPI was reported in line with expectations as investors now set their sights on the data-packed calendar for today. German and EU GDP numbers are scheduled to be released in the morning, European time, while the US retail sales are to be released today afternoon.

The coronavirus fears are also not helping the EUR as investors prefer to invest in safe haven currencies, such as the dollar. The latest numbers from China show that the death toll has surpassed 1,300 with more than 60,000 diagnosed cases so far.

Two days ago, Angela Merkel’s would-be successor withdrew herself from the leadership of the CDU party, pushing Germany’s biggest party and its country into a period of profound political uncertainty. Given the political and economic importance of Germany for the Euro zone, it is apparent why investors don’t feel so confident about the single currency in the near future.

Technical analysis: The “Macron gap” may be the next target

EUR/USD printed a low of $1.0834 yesterday, the lowest the price had been trading since April 2017. The bears are eyeing the confluence of support lines around the $1.08 mark as their next target. As seen below in the chart, the descending channel’s support comes around the $1.0780 handle, offering a major support to bulls.

“Overall, there is no early sign that the current weak phase in EUR is stabilizing. Only a move above 1.0950 (‘strong resistance’ level previously at 1.0980) would indicate the weakness in EUR has run its course,” FX Strategists at UOB Group said in a note.

The so-called “Macron gap”, at $1.0778 is yet to be filled, nearly three years after it was formed, when the incumbent French President Macron won the first round of the presidential elections with far-right leader Marine Le Pen coming second.

Summary

EUR/USD has been moving lower on a continuous basis in the past few weeks to finally hit multi-year lows yesterday. The coronavirus fears, political uncertainty in Germany, and upbeat US data have helped the USD bulls to push the price lower.