Euro: USD/EUR (EUR=X) Gains as Risk Appetite Taints Dollar Demand

Euro: USD/EUR (EUR=X) Gains as Risk Appetite Taints Dollar Demand

Euro: USD/EUR (EUR=X) Gains as Risk Appetite Taints Dollar Demand

The dollar has had a relatively strong relationship with the equity markets as of late. The sharp decline in the stock market in March led investors to move to cash positions which led to a rally in the dollar index (DXY) to highs not seen in three years last month.

The high in the dollar index in March lines up well with the low in the S&P 500 which suggests that investors are no longer stockpiling dollars as they return to the equity markets.

In a show of optimism, the S&P 500 made an important break above its 200-week moving average on Monday. The same indicator had held the index lower twice last week.

Currency traders should keep a close eye on equities as the trend in that market stands to continue driving the dollar, at least over the near-term.

In terms of economic data, the week ahead doesn’t have a lot of scheduled data releases. The few items that are on the calendar aren’t likely to move the markets as they reflect a period ahead of the virus escalation.

A figure to keep an eye out this week is the US jobless claims figures. This report has shown a rapid increase over the last few weeks which gives a sense that the negative impact the virus is having on the economy is just starting to begin.

The move higher in EUR/USD has some momentum behind it. Further, the dollar is weakening broadly against the major currencies. Both of these points suggest that the currency pair has further room to the upside.

Perhaps a critical component to the EUR/USD recovery is the S&P 500’s ability to sustain above its 200-week moving average. Some traders may have been looking for a triple top near 2650 resistance and it’s too early to determine if the current leg up isn’t merely liquidating weak hands.

Near-term resistance for EUR/USD falls at 1.0926 while dips towards 1.0800 are expected to hold buyers.

Technical Indicators

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 1.10.

The projected upper bound is: 1.11.

The projected lower bound is: 1.06.

The projected closing price is: 1.09.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 26 black candles for a net of 3 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 33.8140. This is not an overbought or oversold reading. The last signal was a buy 0 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 45.90. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 21 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 -5. This is not a topping or bottoming area. The last signal was a buy 11 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed down -0.001 at 1.088. Volume was 83% below average (consolidating) and Bollinger Bands were 63% wider than normal.

Open     High      Low     Close     Volume___
1.089 1.090 1.087 1.088 13,916
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.09 1.10 1.11
Volatility: 15 14 8
Volume: 116,869 105,183 79,137

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.

Summary

FOREX EUR= is currently 1.7% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on EUR= and have had this outlook for the last 4 periods.

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