The theme for most of the summer has been the resilience of the euro. Whenever bad news hit, it would hold its ground and then drift higher.
Suddenly, in the past three days the legs have been kicked out from under the euro. German data has been softer including a surprise fall in July retail sales today. Inflation is on the low side but the economy isn’t nearly weak enough for the ECB to take steps next week.
I don’t rule out month-end flows or money shuffling out of emerging markets but the picture isn’t clear. What is more clear is that the euro is at at technical inflection point. The August 15 low is being tested now and the August 2 low of 13190 is just below. The 55-day moving average is also in the mix.
EURUSD daily chart with 55-dma
Those are some solid support levels and there are reports of solid bids protecting support. The week is also quickly winding down so some consolidation is likely on the menu. We may see one more push lower but I like EUR/USD longs here or after Europe closes, with a tight stop.
