Today we shall take a look at the EUR/USD currency pair. At the beginning of August the pair made a small climb to 1.1884, from which it then retreated, but now we are seeing another bullish push very close to this level.
The outlook for the European single currency remains mostly positive. While some experts have warned that the recent optimism about the euro might be hasty, the economic calendar is once again getting more and more traction. Recent fundamentals from the European Union have been overall better than the forecasts, which speaks of either an economic recovery, or of too much pessimism in the forecasts themselves. In either case, Europe is definitely shaking off the worst of the coronavirus pandemic. This week we expect more information to come after a meeting of the European Central Bank on Thursday; we are also looking forward to Friday’s PMI data to see where the European economy stands. If this week’s reports are not worse than the forecasts, then the euro has every reason to keep rallying against the dollar.
On the other hand, the US dollar is in a more complicated position compared to the euro. To put it simply, there is quite a lot happening in the United States that can influence the dollar. First and foremost, the USD recently received a passive boost from the inability of the two chambers of Congress to agree on a new stimulus bill. This uncertainty continues for a fourth week now; recall that more stimulus means a strengthening in the US stock indices and a weakening in the dollar. Furthermore, the USD is influenced by the development in the conflict between the United States and China, where a worsening of the relationship means more safe haven demand, i.e. more demand for the dollar. The two countries were set to hold a video conference on Friday to discuss their recent issues but it is unclear if that happened, as some scheduling conflicts were pointed out earlier. Still, Trump’s administration has spoken favorably of the current state of trade with China, despite all of the other problems Donald Trump likes to bring up. So far it seems that no matter how hostile the two countries sound, they are not ready to renew their trade war. Thus, the case for the dollar strengthening in the long term is not particularly strong.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1846, with the price currently trading below it. The daily support levels lie at 1.1839 and 1.1825. The daily resistances are located at 1.1860 and 1.1867. The indicators of technical analysis are confident in strongly recommending a buy position today.
