Euro falls on fresh risk aversion

EURUSD came under pressure from fresh risk aversion as violent clashes in the Middle East boosted uncertainty, prompting investors into safety.

The pair opened with a gap lower on Monday and so far retraced slightly more than 50% of last week’s three-day recovery rally, generating initial signal of an end of corrective phase.

Fundamentals are likely to remain the main driver these days, with further weakness expected on deteriorating situation.

The single currency was also pressured by weaker than expected German Industrial production in August which contracted for the fourth consecutive month, adding to growing fears that the economy is sliding into recession.

Technical studies remain predominantly bearish on daily chart, as 14-d momentum is deeply in the negative territory and continued to head south and most of MA’s are in bearish configuration.

Larger downtrend (from 2023 peak at 1.1275) stays intact, with the latest recovery attempt to be seen as a minor correction as long as price action is capped by pivotal barrier at 1.0611 (broken Fibo 38.2% of 0.9535/1.1275 rally, now reverted to resistance and reinforced by falling 20DMA).

Today’s close below cracked 10DMA (1.0533) would add to negative signals and make the downside more vulnerable, with violation of new 2023 low (1.0448, posted on Oct 3) to risk test of next target at 1.0405 (50% retracement of 0.9535/1.1275).

Caution on repeated close above 10DMA, which would add to signals of still strong bids, but near-term price action is likely to remain in extended consolidation while limited by pivotal levels at 1.0533 and 1.0611.

Res: 1.0574; 1.0611; 1.0661; 1.0700
Sup: 1.0519; 1.0482; 1.0448; 1.0405