The euro has fallen 3% from a 28-month peak at 1.2014 hit on Sept. 1 and key technical and fundamental factors point to further losses.
The 5, 10 and 21-day moving averages are aligned in a bearish formation and tilting lower, which is a strong signal a short-term downtrend is underway.
The break below the Aug.
3 low at 1.1695 indicates a range break-out, with a potential target of 1.1470-90, where the 38.2 Fibonacci retracement of the entire 1.0636-1.2014 rally converges with the key 100 DMA.
The euro had been drawing support from signs the euro zone economy was recovering on the back of a historic EU fiscal aid packagethat complemented aggressive easing steps by the European Central Bank nL5N2ES2N0nB5N28S01P.
The second wave of coronavirus infections in Europe has undermined those efforts and recent data indicates the recovery is stalling nL5N2GK1NO.
The recent fall in risk assets has broadly supported the USD and forced the large number of dollar shorts to pare back. One factor behind the fall in risk assets is uncertainty surrounding the November U.S. election and fading expectations a fiscal aid package will be agreed beforehandnL2N2GK0UZnNRAczdn2x. CBA notes that this will likely support the USD because it is a "countercyclical currency" - as counterintuitive as that seems.
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