Outlook for the Euro: EUR Forecasted to Undergo a Deeper Selloff Should Today's Spike Prove Temporary

Today we see the shared currency staging a rally against a number of currencies, at 11 AM in London we see:

Euro (€) ⇨ US Dollar ($) (EURUSD): 1 EUR = 1.3175 USD +0.00060 (0.046%)
Euro (€) ⇨ British Pound (£) (EURGBP): 1 EUR = 0.8434 GBP -0.00281 (-0.332%)
Euro (€) ⇨ Australian Dollar (AU$) (EURAUD): 1 EUR = 1.4413 AUD -0.01335 (-0.918%).

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Outlook for the Euro on Wednesday the 4th of September

Turning to the near-term outlook for the Euro we first hear from Emmanueal Ng at OCBC Bank:

"With the pair now having leaked below it 55- day MA (1.3188), the temptation for a move towards the 200-day MA (1.3146) may mount if the ECB proves sufficiently dovish on Thursday."

Craig Erlan at Alpari UK warns that the current spike in the Euro Dollar could be temporary:

"Based on previous price action, we could now see a fall back towards 1.30, with support being found along the way around 1.3140 (200-day SMA), 1.3130 (20-day SMA/middle bollinger band) and 1.31 (50 fib level/50-week SMA).

"It is worth noting that while a break towards 1.30 now looks likely, we could first see 1.32 retested as a new level of resistance, potentially after finding support from one of the levels above. This would act as confirmation of yesterday’s break."

Over at Swissquote, Ipek Ozkardeskaya says the euro could be set for a deeper sell-off:

"EURUSD remains well supported above the 200-day moving average, and our 1.3160 target is still being tested ahead of the ECB policy meeting due tomorrow. There is still noticeable demand located at 1.3146 (200dma), however trend and momentum indicators are pointing towards a deeper sell-off, keeping us bearish.

"The next support can be found at 1.3146 (200 dma), 1.2995 (10th July reaction high), 1.2963 (11th July low), 1.2877 (Fibonacci 50% retracement on Jul 12’ – Feb 13’ rally), then 1.2820 (20th May low). The first region of supply is located at a distant 1.3455 (14th Feb high), then 1.3520 (13th Feb pivot high)."

Luc Luyet at MIG Bank confirms that a recent break of key support is a bearish signal for EUR/USD:

"EUR/USD has broken its key support at 1.3190. Although the breakout is negative, the lack of confirmation thus far from GBP/USD (key support at 1.5423) and USD/CHF (key resistance at 0.9395) softens the bearish implications.

"Supports stand at 1.3067 (18/07/2013 low) and 1.2994 (15/07/2013 low). Hourly resistances are at 1.3199 (intraday high) and 1.3255."