The EUR/USD is pressing 6-month Lows amidst Italian and Spanish political turmoil. This currency cross is overrun with fundamental influences currently. USD strength, Higher Oil Prices, and a potentially hawkish ECB in the future are all playing their roles at once. Low Eurozone inflation has restricted the ECB, but things may be changing with higher oil prices lingering on. Will Italy leave the EU? What course will Spain follow? These are questions only the future can answer. However, all of these components are weighing heavy on the EUR/USD, and the Bears love every minute.
Pressure is downward, and the market is trading above a Critical Pivot at the 1.1453 level. A very rough trade is expected between the 1.1715 – 1.1453 trading band. A failure from 1.1453 most likely will spark fresh selling by the Bears. Use caution fighting a slide in the market here. Downside momentum has the potential to pile drive the EUR/USD back to new move lows down to the 1.1191 Support target. Volatility is rising, and as the fundamentals shake things up volatility is not likely to drop for a while. The lazy trading days of summer this year may avoid the EUR/USD, because this market is nowhere near a flat line trade. Use caution for Bullish plays if the currency falls back on these lower levels. The S3 downside target of 1.0818 is the longer term sell off objective. If the fundamentals continue to hammer this currency, then Bears will continue to dominate as the EUR/USD skims Support.
It will most likely take a breach of the 1.1715 Resistance level to instigate fresh buying again. This will not be an easy fight for the Bulls. Historically there are many Highs and Lows around this price level. A sustained EUR/USD trade above 1.1715 takes this market off edge for a time. 1.2040 is the longer term upside objective. If the market can muster up enough strength to reach the higher targets it is not indicative of a full trend change. This area would be a great place for the Bulls to run out of gas before the next major leg lower. A continuation of the higher oil prices, political instability, and potentially hawkish ECB will most likely keep the EUR/USD poised for more sell off occurrences in the not too distant future.