From a technical perspective, the pair might continue to face stiff resistance near the 1.1600 mark amid extremely overbought conditions on the daily chart. The mentioned level coincides with the 50% Fibonacci level of the 1.2555-1.0636 downfall, which if cleared decisively should pave the way for an extension of the recent strong bullish trajectory. The pair might then accelerate the momentum towards reclaiming the 1.1700 round-figure mark before aiming to test the next major hurdle near the 1.1745-50 region.
On the flip side, immediate support is now pegged near the 1.1530-25 region. This is closely followed by the key 1.1500 psychological mark. Failure to defend the mentioned support levels might prompt some technical selling, though any subsequent slide might still be seen as a buying opportunity. The emergence of dip-buying should help limit the downside near the 1.1430 horizontal support.
Fundamental Overview
|
GMT
|
Event
|
Vol.
|
Actual
|
Consensus
|
Previous
|
|---|---|---|---|---|---|
| WEDNESDAY, JUL 22 | |||||
| 24h |
JPY Marine Day
|
||||
| THURSDAY, JUL 23 | |||||
| 06:00 |
-0.3
|
-5.0
|
-9.4
|
||
| 06:45 |
82
|
85
|
78
|
||
| 09:00 | |||||
| 10:00 |
-38%
|
-58%
|
|||
| 11:00 | |||||
| 12:30 |
1,300K
|
1,300K
|
|||
| 12:30 |
17.067M
|
17.338M
|
|||
| 12:30 |
1,375K
|
||||
| 14:00 |
-12.0
|
-14.7
|
|||
The EUR/USD pair continued gaining traction on Tuesday and shot to its highest level since October 2018. The ongoing rally in the euro is directly connected to the European Union’s agreement on stimulus, which allocated €750 billion to aid the region's worst-hit economies. The pandemic recovery fund comprised of €390 billion in grants and €360 billion in loans. The size of the package was not huge but the fact that the EU members were able to coordinate a compromise spurred demand for the shared currency.
On the other hand, the US dollar added to its recent losses and was being pressured by a combination of factors. The second wave of coronavirus outbreak in the United States has all but extinguished hopes of a quick turnaround for the domestic economy. This coupled with the impasse over the next round of the US fiscal stimulus measures continued exerting downward pressure on the greenback. It is worth reporting that Republicans and Democrats have been struggling to reach consensus on a $3 trillion relief bill.
However, concerns over worsening US-China relations drove some haven flows and helped ease the bearish pressure surrounding the USD, which, in turn, capped the pair near the 1.1600 mark. Diplomatic tensions between the world's two largest economies escalated further after the US abruptly ordered China to close its consulate in Houston amid accusations of spying. China was quick to respond and vowed to respond with firm countermeasures, sparking fears that the latest dispute could be the one to halt the US-China phase-one trade deal.
The pair finally settled around 30 pips off daily swing highs, albeit caught some fresh bids during the Asian session on Thursday. Market participants now look forward to the release of German Gfk Consumer Confidence Survey (August) and a scheduled speech by the ECB Vice-President Luis de Guindos for some impetus. The US economic docket highlights the release of Initial Weekly Jobless Claims. This, along with developments surrounding the US fiscal stimulus and US-China relations will influence the USD price dynamics and produce some meaningful trading opportunities.
Reprinted from fxstreet.com, the copyright all reserved by the original author.
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