Euro Plunges, Key Support Gives Way As Dollar Index (DXY) Registers 2 Months High

Euro Plunges, Key Support Gives Way As Dollar Index (DXY) Registers 2 Months High

Eurozone GDP contracted -0.7% QoQ in Q4, which is less than expected -1.8% QoQ. Over the year, GDP contracted -6.8% y/y. EU GDP contracted 0.5% QoQ. Over the year, EU GDP contracted by 6.4% y/y.

Among the EU member states for which data for the 4th quarter are available, the largest decrease compared to the previous quarter was recorded in Austria (-4.3%), followed by Italy (-2.0%) and France (-1.3 %), and Lithuania (+ 1.2%) and Latvia (+ 1.1%) recorded the highest growth. Year-on-year growth rates for all countries remained negative.

EUR/USD finally breaks the 1.2052 support after resuming the correction from 1.2348. The intraday bias returned to the downside due to channel support (now at 1.1970). The daily chart channel’s support line can provide enough support for the recovery.

A sustained break would indicate that the fall from 1.2348 is indeed correcting the entire uptrend from 1.0635. In this case, the nearest target is 1.1892. In the end, the correction will at least take 38.2% of the retracement from 1.0635 to 1.2348 at 1.1694 before completion.
Dollar Index (DXY) Registers 2 Months High
The strong growth of the dollar at the beginning of the week found an additional source of energy in a moderate correction of the fall of the EUR/USD pair, in turn, on rumors that the economic recovery in the Old Continent may lose momentum.

The Dollar Index (DXY), a trade-weighted basket of major US dollar exchange rates, hit a two-month high on Tuesday, peaking at 91.287 and surpassing the December 7 peak at 91.238. The US dollar was in the background for most of Tuesday’s session, slipping to 90.80 after failing to break the 91.00 level on Tuesday.

The index is currently trading in daily gains of about 25 points, or about 0.3%, and the US dollar is one of the best performing G10 currencies for the day.

Today’s upward extension (up 0.2% since open) indicates the next key barrier at 91.30, breaking of which will add signals to a stronger correction and draw attention to the daily cloud top (91.96) as well as 50% pullback to 94.78/ 9.15.

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Author : Azeez Mustapha

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Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.