EURUSD bulls are in control. The pair continues its march higher, and 1.20 is the next logical target. However, it reached dynamic resistance on the upper edge of a rising channel, raising some questions about the future strength of the rally.
But this is not a Euro story. Regardless of the enthusiasm seen on the EURUSD march higher, this is rather a USD story. The dollar is sold across the board, continuing to fall virtually against all developed market currencies.
Traders have a saying – never fight the Fed. Once again, it proves correct.
Since the Fed intervened, the USD slide began and continued unabated. Maybe today’s FOMC Minutes will offer a reason for the USD to turn?
If this was a EUR story, the strength should have appeared on all EUR pairs. Or, at least, on the most relevant ones.
Many traders argue that the fundamental landscape changed. Since the Recovery Fund and the joint debt announcement, funds started to flood European assets. This is correct, but only partially.
The EURGBP did not join the party. Neither did the EURAUD. Not to mention the all-important EURCHF – it lags too much the price action seen in the EURUSD pair.
EURUSD Technical Picture
If this is a USD story, expect the EURUSD to turn when the USD turns. In other words, either a USD event will be responsible for such a turn, or simply profit-taking.
From a technical perspective, the EURUSD bullish trend still looks strong. As long as the market remains in the upper half of the rising channel, going short is risky business. That is especially true considering the 1.20 round number and its significance.
Aggressive traders may want to try a small short trade around 1.1950 with 1.2050 stop loss. This area provides strong dynamic resistance, often tested on the way higher. For a hundred pips stop loss, the reward should exceed the 1:3 rr ratio, so look for a move to 1.16 to book the profits.