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EURUSD Price Heading For Key Support Levels, Bounce Possible

EURUSD Price Heading For Key Support Levels, Bounce Possible

2019-07-04 09:30:00
Martin Essex, MSTA, Analyst and Editor

EURUSD price, news and analysis:

  • Further losses in EURUSD are likely to be limited as the pair nears several important support levels.
  • News that the US and China will resume trade talks could also help the Euro.
  • Trader positioning data are sending a bullish signal too.

EURUSD price well placed to bounce

The EURUSD price has steadied just above several important support levels on the chart and is well placed to bounce higher from them. As the hourly chart below shows, the pair has been falling in recent days within a rising channel and could ease to the channel support line, currently at 1.1242. If that support holds, a rally is the most likely outcome.

EURUSD Price Chart, Hourly Timeframe (June 5 – July 4, 2019)

Latest EURUSD price chart.

Chart by IG (You can click on it for a larger image)

There is further support at 1.1225 from a previous resistance line joining the lower highs touched since September 24 last year, as well as at the 50-day moving average at 1.1249, the 100-dma at 1.1251 and the 20-dma at 1.1304.

As I suggested here yesterday, further short-term losses are possible until these supports are reached but a rally towards the middle of the channel thereafter is likely unless they break.

You can click here for longer-term forecasts for the Euro and the US Dollar in Q3

Interest rates in focus

From a fundamental perspective, much depends on interest rates. Both the Federal Reserve and the European Central Bank look to be preparing the ground for interest-rate cuts but the Fed is likely to move first, potentially weakening USD.

Moreover, US President Donald Trump has again pressed the Fed to loosen monetary policy, tweeting:

Trump tweet.

Meanwhile, many Eurozone government bond yields have dipped to record lows but that has been outweighed by steep falls in the US-German 10-year government bond yield spread since late April this year. An improvement in overall market optimism on news that US-China trade talks will resume next week has already lifted the US stock market to a record high and could help the Euro too. This follows news that the US trade deficit widened in May by more than forecast to a five-month high.

Bullish signal from sentiment data

Turning to market sentiment, IG retail trader positioning data are currently sending out a bullish signal even though more traders are currently long the pair than are short.

Latest retail trader positioning data.

That said, trading will likely be thin near-term given that US traders are off work for the 4th of July holiday and trading will likely be cautious ahead of US non-farm payroll data Friday.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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