Today we shall take a look at the EUR/USD currency pair. The upward momentum that first began in the end of May is still strong. Despite a more tentative process in June, the pair has now turned confidently bullish and continues rising each day. The rate is at an almost 2-year high right now.
The euro is likely to remain strong, boosted by optimism about the eurozone’s recovery after the pandemic. The main factor is, of course, the EU agreeing on the European Commission’s proposed recovery fund, which would bring 750 billion euro in stimulus to the most affected member states. Recent fundamentals have also shown that the economy is bouncing back and GDP data expected this week should confirm these results. Today’s most anticipated report is the German IFO business climate, which is a crucial factor when looking at the EU’s biggest economy. Positive factors aside, some experts are now warning that the recent changes have led to the single currency being overbought, so a downward price correction is due any moment now as some investors begin to claim their profits. So, while the overall outlook for the EUR is still immensely positive, beware of corrective drops.
The USD, on the other hand, is currently facing quite a bit of negative pressure. Although the United States managed to produce better than expected fundamental results throughout the coronavirus pandemic, lately the data has been turning stale. Moreover, investors are now seriously concerned about the pace at which the United States is going to recover from Covid-19 because several states remain heavily affected by the virus and the number of new infections is not going down. This week we expect a Federal Reserve decision regarding the monetary policy, though no rate changes are likely. The two chambers of Congress are also trying to secure a new stimulus plan as the previously approved funding is expiring this week. More stimulus, a softer monetary policy, and a prolonged crisis in the US are all going to keep the dollar under pressure.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1648, with the price currently trading above it. The daily support levels lie at 1.1640 and 1.1629. The daily resistances are located at 1.1667 (overcome) and 1.1678 (also overcome). The indicators of technical analysis are confident in strongly recommending a buy position today.
