It's been a really quiet time for euro US dollar in recent months, but I don't
think this is going to carry on. So in this video we're gonna take a look at the big
levels to keep an eye on. Hello, I'm David Jones from capital.com and I thought it
was time for a catch-up on the most popular traded foreign exchange pair
EUR/USD. In recent months we have seen volatility really drop off for the
euro, you know it's normally a pretty active market but we haven't seen that
over the last three to four months or so. So I thought, well, let's take a look at
the euro in a bit more depth because there's a really big level to watch,
I think, in the weeks ahead, that could determine the direction of the euro
against the dollar for the rest of this year. So let's catch up first of all.
We'll take a look at the movements over the last 12 months and we'll look at the
charts in a bit more depth and see where the opportunities may be for EUR/USD.
in the months to come. Let's take a look at the numbers for EUR/USD.
So over the last 12 months, to the middle of February 2019, the price
has dropped just over 9%. So over the last 12 months we have seen US dollar
strength, euro weakness. We've seen the euro slide but what's interesting is
what's happened more recently, over the last six months, the euro today is
trading pretty much where it was towards the summer.. the end of the summer in 2018.
And over the last three months it's still the same. So you can see that the
volatility for EUR/USD.. and we'll see this in a second, when we look at the
charts, has really dried up in recent months. But let's look at what
caused the slide last year, was this US dollar strength. So it is lower than it
was a year ago and we saw a real comeback by the dollar against a host of
currencies from April 2018. So as the US dollar strengthened into the
summer, the likes of the euro, the pound, that sort of stuff, slid. Okay, so that was
really the big story for EUR/USD, last year but we also have of course
ongoing Brexit discussions that affects the European economy, as well as
the UK economy. So that, I don't think, has really helped the euro performance.
The fact that, you know, we still really don't know what Brexit is going to look like this
near to the deadline. And then we have had, in recent months, a slowdown in the
European economy. We've seen the Italian economy go into recession for the third
time in a decade and the German economy narrowly avoiding going into recession.
Last quarter growth was zero percent. So again we are seeing continental European
economies slowing down. So that clearly is hindering the euro. But let's catch up,
let's look at the chart, look at the last year and well let's look at the
levels we should be watching from a medium to longer term view in the months ahead.
so here's our big-picture chart for EUR/USD
This chart, I've zoomed in up until the end of April 2018, just to
catch that.. that massive recovery we saw for the euro in 2017. So it came
into 2017 trading just above one.. really one euro was worth one US dollar,
vice-versa. So about 1.04 was where the market was. And we saw this great run of this great
trend, all the way through 2017. 2017 was a really bad year for the US dollar.
Lots of US dollar weakness saw the euro getting lifted higher and it traded as
high as pretty much 1.25 by February 2018. Went sideways for a bit but then we saw
sentiment change. This is when the US dollar strength comes back in. So we've
moved along to bring things up to date and you can see here at the end of April
2018, the euro starts breaking below this old support around about the 1.22 area
and then starts a slide that eventually sees it trade as low as almost 1.12
by the middle of November of last year. So it was.. it was a big slide. You can see
the US dollar strength coming back here. But then this is why we've seen very
little change over the last three to six months for EUR/USD. You can see
just since November how low this volatility is compared to what we had
for much of 2018. So it's been a really quiet time for EUR/USD but there
are some really big levels to watch. Let's just zoom in. So the low for 2018
was set in November. So the middle of November, the market traded almost down
to 1.12 and we had seen a recovery, a reasonable recovery off that level into
the beginning of 2019, trading up towards sort of 1.155 and 1.16.
But look what's happened since then. It's come back to it once again, as recently as the
middle of February, we've seen a retest of those old lows and that's really the
big level to watch I think, in the weeks and the months ahead for EUR/USD.
It's 1.12. If we're gonna see a bounce and a recovery from anywhere, then we'd
expect to see that 1.12 low from November 2018 continue to hold. So maybe
we will see the euro dollar build a base. At the moment.. at the time of recording,
you can see it did go oversold when it dipped down there in February. So the RSI
is backing this up as good support. In recent days we've seen the MACD give a
buy signal off this level. So 1.12 is really an important level, yeah. So what's
going to affect, I think, if we saw maybe a bit more progress on Brexit
discussions, you know, so we all know maybe what the situation will be after
the end of March, you know, that could help sentiment towards the pound and the
euro but for now at least the euro is really struggling to hold on
to any recovery. So that 1.12 level is really key. Let's just zoom things out a bit.
But on the upside, you know, we've had real barriers in this
1.1552, 1.16 area. So I think that's the level we need to clear, to confirm that a
recovery is actually underway. Because you can see since November, there's been
plenty of back-and-forth to this level 1.12, 1.13. But if we haven't seen a
sustainable recovery, so if we can break out through - at least - through these early
January highs just ahead of 1.16 it does add more weight to the argument that the
euro is going to recover. Let's take a look at the downside.
Clearly no one's got a crystal ball, we don't know, we need to watch these levels
but we also need a plan in place if we did see 1.12 break. Let's just step things out.
If we saw 1.12 break it would put the euro down to its its lowest values
against the dollar since the the early summer of 2017. And I think then we just
have to start looking at more aggressive targets on the downside. You know maybe
below 1.11, maybe back down to these lows from May 2017 around about the 1.08 mark
So this.. this 1.12 line is really, I think, a significant level to watch. So for now
at least we are seeing buyers continue to come in when EURUSD slips
back to here. So for now it's holding and we can make the argument about a
potential recovery. But maybe more cautious traders would want to see a
rally through 1.155-1.16.
If 1.12 breaks it's a much more bearish outlook for EUR/USD and
we haven't had an answer to this really, either way over the last three months.
But it seems unlikely this lack of volatility is going to
continue for another three to four months. I think we will get a break
either way. For now 1.12 is holding that's the big level to watch. So you can see
what a big level 1.12 is, you know, since November it has stopped any further
declines in EUR/USD, but we haven't seen anything like a sustainable
recovery. It came back to this level just in
recent days, so it really is the big one to watch going forward. While it's above
it, you know, it still continues to act as support and maybe we can break some of
those levels on the upside. I think so much is unknown at the moment,
particularly when it comes to Brexit, you know, clearly that's not something that
just affects the UK and the pound. It has implications for the European economy as well.
We've already seen some of those major European economies start to slow
down, so I fully expect volatility for the eur dollar to start picking up
pretty soon. We'll start wrapping things up there. As usual, if you have any
questions or a different view on the euro for the year, let's have the
discussions in the comments down below, I do read them all. If you like the video
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at the euro we will leave things there. So from me David Jones and capital.com
good luck with your trading!