The EURUSD pair is little changed as the market reacts to the strong new home sales data from the US, the rising political risks, and the rising number of Covid cases in Europe. The pair is trading at 1.1663, which is a few pips below yesterday’s low of 1.1626.
Data from the United States showed that new home sales continued to do well in August. According to the commerce department, the total sales rose to more than 1 million, which is the highest level in more than 10 years. The 4.8% increase was better than the 0.1% decline that analysts polled by Bloomberg were expecting.
In recent months, the number of new home sales have increased rapidly partly due to low interest rates that have lowered mortgage rates. Indeed, the number of mortgage applications in the US has been rising.
The EURUSD is also reacting to the rising number of coronavirus cases in some European countries such as the United Kingdom, Belgium, and Italy. Yesterday, the UK confirmed more than 6,200 cases, the highest daily increase since May. And health officials expect that the number will continue rising in the coming days.
The EURUSD rose slightly possibly because of the performance of the stock market and the statements by Fed officials. The Dow Jones, S&P 500, and Nasdaq 100 rose slightly helped by strong performance by technology firms. In a report, analysts at Danske Bank expect that the pair will remain under pressure. They wrote:
“Since last week, EUR/USD has shifted from the 1.18-1.20 range to testing 1.16. We suspect the factors, which have combined to create this situation, will continue to weigh until year-end. We thus see EUR/USD staying on the weak side versus recent history.”
EUR/USD technical outlook
The EURUSD pair is trading at 1.1663. On the daily chart, we see that the price is still below the important level of 1.1750, which is acting as the neckline of the head and shoulders (H&S) pattern. The pair is also along the 23.6% Fibonacci retracement level. (This retracement connects the highest level in September and the lowest level in March). Most importantly, the pair has moved below the lower line of the Keltner channels.
Therefore, I suspect that the pair will continue falling as bears aim for the next support at the 38.6% retracement level of 1.1483. On the flip side, a move above the neckline at 1.1750 will invalidate this trend.
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EURUSD technical chart
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