Euro Exchange Rates: Gravestone Doji Hints at EURUSD Reversal

The EURUSD exchange rate could struggle to add to recent gains as a technical signal confirms buying interest is drying.

However, the euro to dollar exchange rate has now run into a key resistance point and a solid extension from current levels remains questionable.

At the time of writing the pair is quoted at 1.1380.

Analysis from Dukascopy suggests the pair will struggle to advance:

"After yesterday's session we now have an additional bearish signal, which is a gravestone doji. We expect the resistance at 1.14 to withstand the buying pressure and send the price lower.

"The nearest significant support is 1.13, represented by the weekly pivot point. This level, however, is unlikely to underpin the pair. EUR/USD should bottom out lower. The first potential reversal point will be the monthly PP at 1.1250, followed by the 55-day SMA at 1.12."

However, a foreign exchange briefing issued by Lloyds Bank fancies the EURUSD to advance beyond 1.14 this break now leaves the exchange rate at risk of a further grind towards the 1.1460 September high.

US Dollar Weakness Extends, EURUSD Support at 1.12

The US dollar has been under pressure since the release of the poor employment report issued on the 2nd of OCtober.

The miss on employment expectations has seen forex markets price the US dollar complex lower in anticipation of the US Federal Reserve delaying their interest rate raising cycle into 2016.

"Unless we get a serious commitment shift from the Fed it is hard to see a strong rally developing in the USD at this stage," point out Lloyds who confirm that it ultimately rests with the Fed as to whether the USD refinds its bullish form.

Improved risk sentiment and slightly less encouraging EZ data flow  in the last two sessions may put a lid on the EUR/USD but broad dollar weakness may still remain the overarching theme.

As such, expect supports at 1.1200, the 55-day MA (1.1176) and the 200-day MA (1.1151). On the topside, the pair would have to clear 1.1300/50 to make any meaningful impact on the upside.

British Pound Hit by Inflation Data

Meanwhile, the pound / dollar exchange rate fell by 1% as figures showed headline inflation turned negative again last month.

The continued lack of price pressures is good for the consumer but no doubt not helping those who are looking for higher exchange rates from which to sell sterling.

It seems the majority of the downside pressure on prices is coming from low energy and food prices which makes a rate hike from the Bank of England harder to justify.

“Sterling continues to look a little vulnerable against the ‘comeback’ euro and having breached 1.3450, looks set for a test back below 1.30 in the months ahead. Last week, news that the trade deficit had grown to over £11bn in August demonstrates that we are still importing too much and exporting too little. One of the big influencers on trade is the value of the domestic currency and the fact that sterling is now dealing 10 cents lower against the euro than in July, will come as a welcome relief to the exporters," notes Chris Towner, chief economist at HiFX.