Today we shall take a look at the EUR/USD currency pair. After a steep climb in July, the rate of this pair is now entering murky ground where the upward momentum seems to have been exhausted.
Though it is true that over the weekend the euro paused its rally against the dollar, this does not mean that the European single currency is done. Quite on the contrary, there are clear signs that the European economy is recovering and that the worst of the coronavirus pandemic is behind it. With ample stimulus agreed upon, fundamentals from Europe have nowhere to go but up, and the euro will continue to ride this bullish wave for the foreseeable future. If we see any weakness, it will be short-term and more likely due to investors settling positions (taking profit) and minor price corrections that will not affect the long-term trend. Moreover, this week will be rather quiet for the euro, so we need to look to the dollar to determine how the rate will move.
The position of the US dollar is currently tied to the state of the economy of the United States. Traditionally, the dollar performs worse when the economy is boosted by stimulus and stocks are doing well. Right now that is the scenario we are seeing. The Federal Reserve last week confirmed that it will stay committed to a dovish policy for a while in order to support the economy better. In addition, US stocks are riding high thanks to the tech sector’s outstanding performance in this time of crisis. Thus, right now investors have no need for safe havens, which means they are not looking to buy the dollar. The USD will continue declining in value unless something happens to trigger safe haven demand again.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1752, with the price currently trading above it. The daily support levels lie at 1.1707 and 1.1651. The daily resistances are located at 1.1808 and 1.1853. The indicators of technical analysis are confident in strongly recommending a buy position today.
