Introduction

After the EUR/USD bullish party was spoilt at 1.2743 a couple of days ago, the pair has been falling like a rock. Currently, the common currency has retested the support area at 1.2500 and it is about to make its mind whether to recede upwards or plummet further downwards.

Factors Affecting

The recent Germany’s IFO Business Climate Index report gave a weaker-than expected value. The index dropped from 106.9 to 105.3, lower than the projected value of 106.1. Notably, this makes the second consecutive monthly drop and the lowest reading in 24 months. This negative report is perhaps an indicator that debt problems are brewing all over the euro zone, and the region’s economic stagnation may still continue for sometime. As a result, this is what has sent red flags in the market.

Technical Analysis

Technical analysis on the EUR/USD reveals it has retested the major support area at 1.2500. Immediate resistance is found at 1.2600. A clear break above this could make the pair retest 1.2743 or move higher. On the flipside, if the pair convincingly breaks the support area, it may move to 1.2400 or lower.

Forecast

The best case scenario would be to wait and see if the pair will either bounce off the support area or break it before pulling the trigger. Otherwise, you may be caught on the wrong side of the trade if you decide to enter the market on premature conditions.

DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.