Today we shall take a look at the EUR/USD currency pair. The pair attempted another rally last week, which did not prove particularly successful. This new week finds the pair still highly volatile and refusing to commit to a trend.
Much like last week, today we can report that the European single currency is no longer buoyed by a strong bullish momentum. The euro had a massive recovery in July due to hopes that the European economy will quickly recover thanks to the approved stimulus plans. Nevertheless, now experts are starting to believe that the extension to 1.19 was as far as that factor could carry the euro. Its journey from this point forward will need other incentives, of which there are none at the moment. In fact, there is an increasing concern that the recovery will slow down due to the recent resurgence of the coronavirus in Europe and several disappointing fundamental reports. Today’s inflation rate from Germany and tomorrow’s eurozone inflation reading are important, but arguably less so than what is happening with the dollar. For now at least, the euro will yield to the USD to determine where the pair goes from here.
The situation of the American dollar is also quite complicated at the moment. Last week Federal Reserve Chair Jerome Powell announced that the central bank will be changing its policy, keeping interest rates low for the next few years and allowing inflation to rise above 2% in order to promote economic growth. This week the Fed’s expected to reveal more about its plans how to achieve those goals, with more stimulus very likely to come into play. Thanks to this monetary policy softening, the US dollar will weaken in the long term.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1911, with the price currently trading above it. The daily support levels lie at 1.1902 and 1.1887. The daily resistances are located at 1.1926 and 1.1935. The indicators of technical analysis agree in strongly recommending a buy position today.
