Down, down, down we go
The pair touched new lows for the year in Asian trading earlier as the dollar index rose to a fresh 13-months high and continues to trade near the highs currently. EUR/USD touched a low of 1.1320 and the bearish momentum is still very much going strong.
The next support in the pair comes from the 5 July low @ 1.1313 but if anything that will be more of a speed bump than a solid base. The situation in the Turkish lira remains fragile and fears of contagion have yet to fade significantly.
Stocks are lower again today as the yen and dollar remains at the front of the rest of the major bloc in trading so far with flows seen into bonds once again. Add to the fact that there are still lingering concerns surrounding European banks and their exposure to Turkish credit, it makes it difficult to shake off the negativity until the Turkey situation gets resolved.
And Turkey's decision to retaliate with increased tariffs against US imports certainly suggests that we're not anywhere near to finding common ground between the two countries at this juncture.
If you need an idea of how much the current trading sentiment favours sellers, you don't have to look too far back. Yesterday's trading certainly highlighted that as sellers defended a move higher at the "first line of defense" at the time.
The near-term chart also continues to suggest that we're not anywhere near a significant retracement at this point and as long as price stays below the two key hourly moving averages, then it is suggestive that we're still in store for further pain to come.
For any potential retracement higher, the line in the sand right now is the lows on Monday around 1.1368. But given the current backdrop in the market (Turkey situation and dollar strength), it is still a sell on rallies play for EUR/USD.
