The EURUSD pair is one of the top performers this July. Ever since the April European Commission’s announcement of the EU Next Generation deal, the Euro traded with a bid tone.
In particular, the EURUSD broke from a months-long consolidation around the 1.08 area. The news that the European Union is willing to issue joint debt and redistribute its proceeds among members moved it from 1.08 to 1.13 in a jiffy.
After the June 2020 ECB meeting, the pair consolidated levels. It did not fell more than 23.6% of its rally, as all eyes were on the EU Summit that ended this week.
Before and after the summit, EURUSD bulls bid for the pair relentlessly. It reached 1.16 yesterday, with little or no signs of backing up.
USD Declining Across the Board
Truth be told, it was not only the Euro that traded with a bid tone. The USD did not have a good July, as it fell against all majors – NZDUSD, AUDSD, GBPUSD, USDCAD, USDCHF.
Despite the fact that the Fed’s balance sheet declined, and the ECB’s easing outpaces the Fed’s, the EURUSD keeps finding buyers at such elevated levels. For how long?
EURUSD at Dynamic Resistance
Dow Jones ended 2.32% higher at 25,595 after the index tested and bounced from the 50-day moving average. The index rejected several times the last two weeks at the 200-day moving average. The short term picture has improved after yesterday’s gains, but the long term outlook remains bearish below the 200-day moving average.
The pair recently reached dynamic resistance. After the EU Summit that ended this Tuesday, the pair reached the upper edge of a rising channel. Moreover, in doing so, it made a new marginal high when compared with the one before the pandemic.
We may even say that the consolidation in the middle of the channel, the one between the June and July ECB meetings, looks like a pennant – a continuation pattern that just ended. But after an advance of eight big figures (i.e., eight hundred pips), and a new marginal high, the big question is if the EURUSD is able to stay this high.
1.15 is key moving forward. A move below means the pair retraces inside the rising channel. Bears would want to go short against the highs and target a move into the lower half of the channel, for an appropriate risk-reward ratio.
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EURUSD Price Forecast
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