The EURUSD bid continues unabated – a one-way street recovery since it corrected to 1.17. The entire previous week, traders bought it on every single dip, and closed Friday at the highs.
Not only the EURUSD, but the Euro in general trades with a bullish tone. EURGBP, EURJPY, or EURAUD acted in a similar manner. Since the announcement of the Recovery Fund, investors bought the single currency in a frenzy, and new highs for the year are just around the corner.
What Could Spoil EURUSD Bulls’ Party This Week?
The week ahead is relatively poor in important economic events. Only the PMIs on Friday will offer further clues about the economic recovery and may cause higher volatility in the Euro pairs.
Until then, look for the bid in the Euro pairs to continue. August is traditionally a slow trading month, a month when correlations dominate the price action. So far, the first two weeks of the month revealed similar trading conditions, with the EURUSD being strongly correlated with the U.S. equity markets.
With the Dow Jones and the S&P500 indices close to all-time highs, it is no wonder the EURUSD is at the highs too. Therefore, if we are to see a reverse in the EURUSD trend this week, look for clues in the U.S. stock market rather than in potential news out of Europe.
EURUSD Technical Analysis
The rising channel on the daily timeframe shows the EURUSD’s strength. The price action remains bid while it takes place in the upper half of the rising channel, and the pair is likely to see bids in the lower half too.
Both bulls and bears have something to trade here. Bulls may go long for as long as the price keeps closing on the upper side of the channel on a daily basis – 1.20 is the logical target. Short interest is likely to increase if the EURUSD pair breaks the channel. There is still a long road up to that point, as the sentiment must change in order for such reverse to take place. On such a break, place a stop at the highs and target a 1:2 risk-reward ratio.