The EURUSD pair is back at the highs. It made a new high today, albeit a marginal one. In a typical fashion for strong trends, the price stabs the lows or highs of a bearish or bullish trend just before London’s opening. The aim? To trip some weak stops.
So far, it found nothing but sellers, but the 1.19 area still attracts. Not to mention the all-important, psychological level – 1.20.
PMI Services Well Above the 50 Level
EURUSD bulls have all the reasons in the world to celebrate. The common currency caught a bid tone after the European Union agreed on the Recovery Fund in late July.
Moreover, economic data for the second quarter starts to surface. So far, so good. With the exception of a poor GDP, the data was on track or as expected.
Yesterday’s PMI Services, a key metric for the Eurozone service-based economies, came out way above the critical 50 level. It pushed the Euro higher on all pairs, not only on the EURUSD.
EURUSD Technical Picture
Picking up a top is not an easy task and often ends up in failure. That is particularly true in the case of a market that rises so much and so fast as the EURUSD did.
However, one cannot ignore some weak signs in the bullish trend. Or, let’s just say, some cracks on a strong trend. This time, it is a possible double top at the 1.19 area. Moreover, while the price did push for a new high, the RSI on the 4h chart diverged. Hence, a possible double top with a divergence on the RSI is all one needs for a bearish setup.
Selling 1.17 for 1.15 with a stop at the highs is not a very good risk-reward trade, but the volume traded should be smaller than usual. Why? Again, the EURUSD trend is still strong, and the market may reverse back to the highs on nothing at all.