News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5ddzFV https://t.co/8GJ6OQYgnW
  • Bitcoin (BTC) started the day on the front foot on the Twitter news before the latest China crypto ban hammered the market lower. Get your weekly crypto forecast from @nickcawley1 here: https://t.co/ZKHGXeVhsR https://t.co/QSltMQml6N
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/DSp7f3YuAx
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/HNqHcbL6vk
  • The US Dollar continues to push higher against ASEAN currencies after the FOMC rate decision. This leaves the USD/SGD, USD/THB, USD/PHP and USD/IDR outlook mostly tilted higher. Get your market update from @ddubrovskyFX here:https://t.co/zn56iTFBxM https://t.co/FbepD4RaFg
  • The US Dollar seems to be back on the offensive against its major counterparts, pressuring EUR/USD and NZD/USD lower as USD/JPY consolidates. USD/CHF surges past key resistance. Get your market update from @ddubrovskyFX here:https://t.co/MrLGSp7FYa https://t.co/XS0176LyOg
  • The Japanese Yen remains in focus with strength potential on risk aversion themes to go along with weakness on themes around higher rates. Get your weekly $JPY technical forecast from @JStanleyFX here: https://t.co/l4UICqJzJy https://t.co/dQ2pS0E4fp
  • Google finance-related search interest in 'Evergrande' has almost overtaken 'Covid'. 'Taper' doesn't even register on the scale https://t.co/P6H9sHFVIB
  • Gold prices gain as potential systemic risks out of China's Evergrande Group roil broader markets. Meanwhile, iron ore is ticking higher after a big drop on Monday as China steps up steelmaking curbs. Get your market update from @FxWestwater here:https://t.co/l4kAWDJ2wm https://t.co/b9m5ADIqqb
  • Gold remains higher despite positive Evergrande news out of China. Meanwhile, copper bulls are pushing prices upward as the potential for a housing crisis in China ebbs. Get your market update from @FxWestwater here:https://t.co/TK3MNntBdA https://t.co/14UKjR4w6M
EUR/USD to Face Range Bound Prices Amid Failure to Test Monthly High

EUR/USD to Face Range Bound Prices Amid Failure to Test Monthly High

David Song, Strategist

EUR/USD Rate Talking Points

EUR/USD attempts to retrace the decline from the start of the week even though the European Central Bank (ECB) warns of a protracted recovery, and key market trends may influence the exchange rate throughout the remainder of the year as the US Dollar continues to broadly reflect an inverse relationship with investor confidence.

Advertisement

EUR/USD to Face Range Bound Prices Amid Failure to Test Monthly High

EUR/USD appears to be stuck in a narrow range after failing to test the monthly high (1.1920) during the previous week, and the exchange rate may consolidate ahead of Thanksgiving as market participation is likely to thin ahead of the major US holiday.

However, the Euro may face headwinds ahead of 2021 as ECB Chief Economist Philip Lane warns that the “the situation will not materially improve in the last weeks of 2020,” with the Governing Council official going onto say that “the full recovery of GDP, back to where it was in 2019, will not happen before the autumn of 2022” during an interview with Les Echos.

Lane also warns against putting “too much importance to short delays in finalising the Next Generation EU (NGEU) plan” as the fiscal package should be geared towards providing “a vision for the next five years,” and it remains to be seen if the ECB will take additional steps to support the Euro Area as the Governing Council plans to “recalibrate our monetary policy instruments at our meeting in December.”

In turn, board member Lane insists that “there is room for further cuts in the future” as the ECB’s main refinance rate, the benchmark for borrowing costs, currently sits at zero, but the central bank appears to be in no rush to deploy more non-standard measures as the “pandemic emergency purchase programme (PEPP) and the targeted longer-term refinancing operations (TLTROs) have been very effective.

As a result, Lanes states that the ECB could “look at a possible redesign, continuation or extension” of its unconventional measures, and it seems as though President Christine Lagarde and Co. will stick to its current tools at its next interest rate decision on December 10 as the European lawmakers look to rollout the recovery fund in 2021.

Until then, swings in risk appetite may sway EUR/USD as the US Dollar broadly reflects an inverse relationship with investor confidence, and it looks as though the key market trends will carry into the end of 2020 as the crowding behavior from earlier this year resurfaces.

Image of IG Client Sentiment for EUR/USD rate

The IG Client Sentiment report shows only 27.37% of traders are net-long EUR/USD, with the ratio of traders short to long standing at 2.65 to 1. The number of traders net-long is 7.58% lower than yesterday and 26.54% lower from last week, while the number of traders net-short is 2.03% lower than yesterday and 3.19% higher from last week.

The decline in net-long position comes as EUR/USD appears to be stuck in a narrow range after failing to test the monthly high (1.1920), while the rise in net-short interest has fueled a greater tilt in retail sentiment as 34.61% of traders were net-long the pair during the previous week.

With that said, the consolidation from the yearly high (1.2011) may turn out to be an exhaustion in the bullish price action rather than a change in trendas the crowding behavior in EUR/USD resurfaces, but the exchange rate may trade within a defined range ahead of the Thanksgiving holiday amid the string of failed attempts to test the monthly high (1.1920).

EUR/USD Rate Daily Chart

Image of EUR/USD rate daily chart

Source: Trading View

  • Keep in mind, a ‘golden cross’ materialized in EUR/USD towards the end of June as the 50-Day SMA (1.1774) crossed above the 200-Day SMA (1.1387), with the longer-term moving average still tracking the positive slope from earlier this year.
  • At the same time, a bull flag formation panned out following the failed attempt to close below the 1.1190 (38.2% retracement) to 1.1220 (78.6% expansion) region in July, with the Relative Strength Index (RSI) helping to validate the continuation pattern as the oscillator bounced along trendline support to preserve the upward trend from March.
  • However, the EUR/USD rally stalled following the failed attempt to close above the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region, with the RSI highlighting a similar dynamic as it slipped below 70 to ultimately break trendline support.
  • A similar scenario materialized in September even though EUR/USD traded to a fresh yearly high (1.2011) at the start of the month, with the exchange rate taking out the August low (1.1696) after staging another failed attempt to close above the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region.
  • Nevertheless, the pullback from the yearly high (1.2011) may prove to be an exhaustion in the bullish price action rather than a change in trend amid the string of failed attempts to close below the 1.1600 (61.8% expansion) to 1.1640 (23.6% expansion) region, with the RSI highlighting a similar dynamic as it breaks of the downward trend carried over from the end of July and recovers from its lowest readings since March.
  • The move back above the Fibonacci overlap around 1.1810 (61.8% retracement) to 1.1850 (100% expansion) keeps the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region on the radar, but EUR/USD may trade within a defined range ahead of December amid the lack of momentum to test the monthly high (1.1920).
  • Waiting for a break/close above the 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion) region to open up the 1.2080 (78.6% retracement) to 1.2140 (50% retracement) area.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES