The Euro to Dollar rate suffered its largest drop since the end of September last week, breaking through a major technical support level. That said, analysts have cautioned that downside risks will continue for the Euro.
The single currency registered a partial fall against the Dollar at the end of last week which could have been a reaction to the latest Covid developments on the continent.
“Peripheral EU FX is feeling the squeeze on this, from the Swedish Krona to the CEE currencies, some of which are reaching cycle lows versus the single currency,” said John Hardy, head of FX strategy at Saxo Bank, in a Friday research note.
“We have hardly suffered much of a setback in risk recently, but the focus on growth concerns in Europe on the natural gas debacle and perhaps now even on Covid, as the SEK in the firing line, given its often that it often is seen as a high-beta proxy to EU economic strength,” Hardy added.
According to Karen Jones, head of technical analysis for currencies, commodities and bonds at Commerzbank: “We have a support line, which connects a number of lows since July, and this comes in at 1.1424 today. There is scope for support on the previous downtrend (from 2008) which is now located at 1.1366 and should act as strong support. We look for this to hold.”
The Commerzbank team cautioned that the Euro could remain under pressure while the market stays under the 1.1655 mark, which matches a downward trend from the May highs over 1.22, to highs near 1.17 from the beginning of October. Yet other analysts warned the Euro could face a further setback in the coming weeks, reports Pound Sterling Live.
“The EUR is steadying in the mid-1.14s but remains prone to more fundamentally driven weakness in the near- and medium-term,” according to Juan Manuel Herrera, a strategist at Scotiabank.
“The EUR has lost significant support points in the past few weeks and trend dynamics across the short, medium and longer-term DMI oscillators are aligned bearishly for the EUR, which typically implies little or no scope for counter-trend corrections and ongoing downside pressure on the market. We continue to target 1.14 as the near-term bear objective. The 1.10/1.11 zone remains very viable in the next few months,” Herrera added.