EUR/USD Price Analysis
- EUR/USD trading at crucial area of confluence
- Euro bulls confidence boosted by Moving Average (MA) crossover
- IGCS supports recent consolidation
EUR/USD PATIENTLY AWAITS UPCOMING ECONOMIC DATA
German inflation figures will be in the spotlight today as a precursor to broader Euro data tomorrow (see calendar below). Coming off a lively Friday last week, EUR/USD has been relatively subdued this Monday perhaps due to public holidays in both the U.S. and UK today.
Inflation has been a recurring global theme this year and the ECB faces similar bond buying questions to its U.S. counterparts as yields continue to track the prevailing uptrend. The U.S. will also release PMI data tomorrow which could result in significant price volatility should actual data deviate significantly from estimates.
Last week all 27 nations within the EU have approved the €750 billion recovery fund which comprehensively details frameworks for each country. Once stimulus starts to flood the market, it will be interesting to monitor the effect on the surging Euro.
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Source: DailyFX Economic Calendar
EUR/USD TECHNICAL ANALYSIS
EUR/USD Daily Chart:
Chart prepared by Warren Venketas, IG
Since the end of March this year, the Euro has been steadily appreciating against the U.S. dollar; primarily due to dollar weakness. This has formed a firm trendline support (black) which has held despite being tested several times over this period.
The last few preceding daily candles have been indicative of hesitancy, which is apparent by the successive Doji candle prints. Doji candles represent a lack of directional bias by bulls and bears revealed by their small candle bodies.
The Moving Average (MA) indicator has recently supplied bulls with additional incentive with the 50-day (black) MA crossing above both the 100-day (red) and 200-day (yellow) MA’s respectively. These strong bullish signals may provide further upside should prices remain above trendline support.
Contrary to the bullish signals mentioned above, the Relative Strength Index (RSI) (black) exhibits a slowing bullish momentum which is opposed by EUR/USD price action. This is known as divergence between price and the RSI – more specifically bearish divergence which is suggestive of a possible price reversal to the downside. Divergence can appear for prolonged periods so assuming an immediate continuation is not wise.
Bulls may look to a candle close above the key psychological level at 1.2200 before entering into possible long positions with an initial resistance target at 1.2267 (previous swing high); while the bearish perspective will bring into focus last week Friday’s support low at 1.2133.
IG CLIENT SENTIMENT DATA FAVORS NEITHER BULLS NOR BEARS
IGCS shows retail traders are currently distinctly short on EUR/USD, with 63% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, because the daily change in long positions (-21%) exceeds that of short positions (-2%) the resultant signal remains mixed which is consistent with the technical analysis outlined above.
| Change in | Longs | Shorts | OI |
| Daily | -1% | 10% | 3% |
| Weekly | -16% | 32% | -4% |
--- Written by Warren Venketas for DailyFX.com
Contact and follow Warren on Twitter: @WVenketas
