Home » Forex » King Dollar Back In Demand As EUR/USD Breaks Below $1.10

King Dollar Back In Demand As EUR/USD Breaks Below $1.10

Dimitar Bogdanov
  • February 6th, 21:33
  • Last Updated: February 6th, 21:34
  • EUR/USD breaks $1.10 on continuous dollar demand
  • US data positively surprises analysts, further boosting the rally
  • “The euro area economy continues to grow, though still with modest momentum,” says ECB Governor Lagarde

Continued demand for the dollar has seen the EUR/USD break below the $1.10 handle in today’s trading session. The bears are now in full control and they are likely to target $1.08 next.

Fundamental analysis: Coronavirus and positive US data spark dollar demand

Investors have continued to invest in the USD amid coronavirus outbreak fears. Furthermore, the positive US data from recent days has also been helping the dollar move higher against almost all currencies.

For instance, the Initial Jobless Claims, for the week ended January 31, fell to 202K, lower than the 215K expected from the market. The January ISM Non-Manufacturing PMI was reported at 55.5, higher than the 54.9 printed in December, and also beating the market’s expectation of 55.

On the other hand, EUR has been pressured by weak German Factory Orders, which fell by 2.1% MoM – market expected a rise of 0.6% – and by 8.7% YoY.

Yesterday, the ECB Governor Christine Lagarde appeared before the European Parliament Economic and Monetary Affairs Committee, in Brussels, to discuss the monetary policy.

“Low interest rate and low inflation environment has significantly reduced the scope for the ECB and other central banks worldwide to ease monetary policy. Broadly in line with our expectations, the euro area economy continues to grow, though still with modest momentum,” said Lagarde.

Analysts believe Lagarde and her ECB have no much space for maneuvering.

“The ECB continues to remind investors that their monetary policy toolbox is nearly empty,” FX analysts at TD Securities said.

Technical analysis: New 4-month low in place

EUR/USD printed $1.0966 today, which is the new 4-month low for the pair. The broken support around the $1.10 mark is likely to facilitate a bigger move lower as the bears now have almost full control over the price action.

In general, EUR/USD has been in an apparent downtrend since 2018 as there is a clean series of lower highs. The bears are now increasing the pressure as they look to push the price further lower.

EUR/USD daily chart (TradingView)

As suggested by the chart, the bears are likely to target $1.0920, before eventually reaching the key mid-term target of $1.08 (the purple box). The broken support around the $1.10 mark will now become the resistance, and is likely to cap any recovery attempt from the side of the bulls.

Summary

The dollar has been moving higher in recent days amid coronavirus outbreak fears and upbeat US data. The bears managed to push the price below the 1.10$ handle and they are likely to set their eyes on $1.08 next.

About the author

Dimitar Bogdanov
Dimitar Bogdanov
I have been a journalist for Invezz since 2012 and am one of the oldest on the team. My focus is on cryptocurrencies as well as general equity markets, although my experience is broad overall.

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