The EUR/USD exchange rate broke decisively higher over the course of the past 24 hours, fuelled by the agreement of an EU rescue deal and budget. Shayne Heffernan, CEO of HEFFX warns caution is advised as the move has become stretched near term.
The euro has been building in strength in recent sessions, but yesterday seemed to be a true game-changer.
Although it took a number of hours to get going following the announcement of agreement for the EU Recovery Fund, once the US session kicked in, the dollar got smashed.
Subsequently, EUR/USD flew higher and through a huge resistance at $1.1490 which was the March high but which also currently takes EUR/USD to levels not seen since January 2019.
The bulls now need to focus on holding this break, which looks to be extraordinarily strong, but stretched and open to profit taking near term.
Momentum confirms the move higher, with RSI into the 70s, MACD lines accelerating higher and Stochastics strong.
However, the caution would come with how stretched the move has become near term.
Looking over previous key moves on EUR/USD, we see the RSI very seldom gets over 70. The problem is that once it turns back, it invariably comes with a major unwind.
That would be the concern of chasing this breakout at immediate levels. Whilst momentum is strong, it is stretched.
We are happy to run with the breakout on a medium erm basis, as move above $1.1490 has effectively opened moves towards $1.1800 area in the medium term.
However, we are also conscious of a near term unwind and a close back under $1.1490 could come with a correction. Initial support is at $1.1470/$1.1490, while there is still strong support in the band $1.1350/$1.1420.
Markets endure Decisive Shift
There has been a decisive shift in outlook across major markets in the last few days.
The drivers have been a new phase of positive risk appetite, but also a significant breakdown on the dollar.
Furthermore, ever more fiscal support, coupled with a strengthening of EU foundations have arisen from the agreement on the EU Recovery Fund discussions. the net result has been a rout for the US dollar, with the US dollar Index falling below support at 95.70.
A negative impact on the US economic recovery in the coming months is being factored in.
Elsewhere though, this dollar weakness is playing into breakouts on gold, silver, oil, equity markets and several other major forex pairs (EUR/USD, AUD/USD, NZD/USD especially).
There is also some near term kick back on these moves, but it looks to have been a decisive shift in outlook for the dollar and period of underperformance seems to be well set now.
Euro/US Dollar Exchange Rate
Today’s Forex Rates
Euro/US Dollar FX Polls
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 1.12.
The projected upper bound is: 1.17.
The projected lower bound is: 1.15.
The projected closing price is: 1.16.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 9 white candles and 1 black candles for a net of 8 white candles. During the past 50 bars, there have been 32 white candles and 17 black candles for a net of 15 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 91.6802. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 75.02. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 30 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 163.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 8 period(s) ago.
Rex Takasugi – TD Profile
FOREX EUR= closed up 0.002 at 1.159. Volume was 73% below average (consolidating) and Bollinger Bands were 8% wider than normal.
Open High Low Close Volume 1.157 1.160 1.156 1.159 30,960
Technical Outlook Short Term: Overbought Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 1.14 1.12 1.11 Volatility: 5 8 9 Volume: 95,861 111,787 91,718
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX EUR= is currently 4.7% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future.
Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on EUR= and have had this outlook for the last 6 periods. Our momentum oscillator is currently indicating that EUR= is currently in an overbought condition.