Today we shall take a look at the EUR/USD currency pair. After reaching a monthly maximum just under 1.19, last week the pair rebounded from the strong resistance level and has been locked in a bearish wave since then, which continues into today.
Despite what the current trend might suggest, the European single currency is actually in a good position to make gains versus the US dollar this week. While it is true that last week’s monetary policy meeting of the European Central Bank did not produce any surprises and did not deliver hawkish hopes for investors, this only increases the likelihood of a tightening getting announced at the next meeting. Fundamental data from the eurozone has been positive and last week’s GDP reports confirmed that. Thus, a tapering of asset purchases seems inevitable this year, which is giving the euro a bullish bias. Even if there are some short-term disappointments in data (which are not very likely), they will not affect the euro as much, considering the monetary policy shift that is expected soon.
When it comes to the US dollar, its own situation is slightly more complicated. Investors had been speculating for months that the Federal Reserve will taper asset purchases soon, perhaps before the ECB does, but so far Powell and his colleagues have taken a cautious approach. It is worth noting that fundamental data out of the United States is slightly more mixed than it is in the EU, and that the US labor market is running into more hiccups than the one in Europe. In other words, the reserve currency does not rely on domestic factors to strengthen it right now. It will likely give up ground to the euro this week, unless risk aversion is high among investors.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1812, with the price currently trading below it. The daily support levels lie at 1.1804 and 1.1799, both overcome. The daily resistances are located at 1.1815 and 1.1820. The indicators of technical analysis strongly agree in recommending a sell position today.
