The pair will likely remain under pressure. 3 negative factors are affecting the euro: low oil prices, the ECB’s QE and the expectations of the US Federal Reserve’s rate hike this summer. Although the currency is oversold and there’s an ever-present risk of a short covering rally, the key is now the market’s sentiment, and that is quite bearish.
EUR/USD made it down from above 1.0800 to 1.0500. Correction towards 1.0700 on Thursday allowed traders to take profit. If support at 1.0500 fails, the euro will fall to 1.0200. In the short-term resistance will be limited by 1.0830 and 1.1090. Our recommendation is still to sell on correction up or on the break of the support.
Given the fast speed of decline and the upcoming Fed’s meeting on Wednesday, we’ll probably see some consolidation in EUR/USD, especially in the first half of the week. Pay attention to the release of the euro area’s and German economic sentiment figures on Tuesday and the ECB’s new tranche of TLTRO for the euro area’s banks on Thursday.