EUR/USD Off Monday Lows But Recovery So Far Lacks Conviction

EUR/USD touched a pre Europe open high of $1.1872 Monday before it turned lower, the rate posting a low through the 1600BST fix of $1.1732 before edging back to $1.1775 ahead of the close. The move lower through Europe and NY Monday was seen driven by general risk aversion, prompted by the downside correction in US equities(though corrected some of these losses into Monday's close) and from reading reports was well expected, though move in itself was deeper than many had called for. However, tentative demand was met into the lows, though this did not not convince Asia as trade was confined to a $1.1753/74 range, with rate holding toward the base into Europe. A break of the $1.1774/76 area to expose $1.1790/1.1800 area. Longer term traders continue to suggest rate has more upside potential and would look to buy into dips toward $1.1700, whilst others suggest concern to be seen on a break of $1.1690. Interim support noted at $1.1732(Sep21 low, 55-dma the latter seen key on a close basis) ahead of $1.1710/1.1695. ECB speakers Tuesday include Villeroy at 0900BST, Panetta(1300BST) and Lane(1500BST). EZ Consumer Confidence due at 1500BST. In the US Existing Home Sales and Richmond Fed also at 1500BST. Fed Evans(nv) speaks at 1500BST, Powell and Mnuchin at 1530BST, Fed Barkin at 1700BST. COVID-19 second wave lock downs in Europe to be watched; Wednesday flash PMI's in focus.
MNI Techs: EURUSD took a turn for the worse Monday, with weak global equity markets driving the dollar higher. This prompted the pair to slip through key support at 1.1738, Sep 17 low. A clear break would reinforce bearish signals that appeared last week. A trendline break drawn off the May 14 low and what appears to be a head and shoulders reversal on the daily chart highlight downside risk. Initial firm resistance is seen at 1.1872, yesterday's high.