EURUSD Finds Support at 100 SMA; Head and Shoulders Still Intact. Where Is It Headed?

Once again, movement on EURUSD is limited in today’s Asian session. The currency pair is currently up by 0.05% from its opening price as it trades around 1.1249. Without any major market-moving economic data on tap from both the US and euro zone, what can we expect from the currency pair?

For one, market sentiment could dictate the direction of EURUSD. This week, we have seen rising cases of the coronavirus spark risk aversion. If this risk-off sentiment continues in today’s trading, the US dollar could benefit from safe haven flows

Secondly, the US unemployment claims report could spark some volatility. Prior to the coronavirus pandemic, investors did not really pay much attention to this report simply because it came out on a weekly basis. However, as of late, we have seen this data spark more volatility. It is due to come out later at 1:30 pm GMT with the forecast at 1,300. A higher-than-expected number could weaken the US dollar and push EURUSD higher while a lower figure could strengthen the USD.

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EURUSD Outlook

On the 4-hour time frame, it can be seen that EURUSD has made lower highs after a series of higher highs. Consequently, a head and shoulders chart pattern has materialized. When you enroll in our free forex trading course, you will learn that this is widely considered as a bearish reversal indicator.

However, for a sell-off to happen, EURUSD needs to close strongly below the neckline support around 1.1211 where the currency pair bottomed on June 12. If it does, the neckline support will effectively be broken and EURUSD could soon fall to 1.1045 where it may test support at the 200 SMA. 

 As of this writing, the currency pair has not cleared the neckline support and 100 SMA. This could also indicate that there may still be buyers in the market who could push EURUSD to near-term resistance at 1.1400.

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