The EUR/USD has had a rough day on today. The reason for this is that the large move in USD has created two markets: an oversold one and undersold one.
This scenario is only going to persist as long as there is no support to the entire market. If there is support, the EUR/USD can use that to take the lead. In such a scenario, the strongest support at the moment is obviously oil prices.
It is the roulette wheel that looks all happy today. One thing that is positive about oil is that it is a good chance to see how each currency performs at long term and short term levels.
The energy sector is a good bellwether for currencies. Oil has historically been known to do well at the beginning of the year. This is because oil prices rise sharply during the first quarter and fall by the end of the year.
We know that the oil industry is doing very well today. With its strong bullish stance on oil, one of the leading oil stocks today is Chevron. The company has consistently done very well in recent months, thus pointing out that the bull run on oil is likely to continue.
Since the EUR/USD has weakened to a low, the Euro has also started to weaken and this is a negative development for the USD. The downside for the USD right now is that the Euro is close to its peak of strength. Thus, the negative pressure on the currency is likely to intensify during the course of the day.
The EUR/USD is slowly sinking as the Euro strengthens. As it dives, the EUR/USD could make it to the bottom before the end of the day.
Here we can note that if the EUR/USD breaks below the 63.00 level then the European currency is likely to start rallying against the Dollar. At present, the EUR/USD has dropped below 60.00. A break below the important support line at the 62.00 level would mean that there is a possibility that the EUR/USD might jump.
Oil plays the role of the strong support for the Euro/USD right now. The recent pullback in oil prices would indicate that the oversold part of the market has bottomed out.
There are five important support levels for the Euro/USD today. The oversold parts of the market are located at 52.99, 61.64, 62.44, 62.87 and 63.00.
Therefore, the weakest support right now is probably oil prices. Although there is not much reason to take overshooting risk as a major risk, it would be a mistake to leave the EUR/USD alone at the moment.