The Euro has turned positive against the US Dollar in the short-term and further gains might be expected from here.
Studies of the four-hour chart shows a healthy rising sequence of peaks and troughs, of higher highs and higher lows.
We expect this trend to continue higher towards a target at 1.0800 just beneath the underside of a major trendline (see 'A' below) drawn down from the 2014 highs.
The trendline will present a tough barrier for it to overcome, however, and we would expect it to stall there and wait for the further upside drivers before being able to pierce above it.
A break above the 1.0740 level would provide confirmation of the continuation up to the aforesaid target.
The daily chart presents a wider panorama of the pair and shows how it is currently oscillating within two trendlines – A which is drawn from the 2014 highs and B from the October 2016 lows.
The trend is less clear on the daily chart but the fact the previous day saw a 100 point push which took the exchange rate above the 50-day MA and the monthly pivot at 1.0685 – both tough resistance levels – infers a handover from bears to bulls.
In addition the MACD is crossing and turning higher in a compelling sign that momentum is starting a new phase higher, thus supporting a bullish outlook for the exchange rate.
“A huge turnaround in sentiment against the Dollar has changed the outlook, with the bulls far more positive. A strong bull candle drove the pair almost 100 pips higher, but more importantly the move was through not only the near-term resistance at $1.0690 but also the pivot around $1.0710," says analyst Richard Perry of Hantec Markets.
The analyst cites momentum indicators as made a sharp improvement with the Stochastics rising strongly, the MACD lines crossing higher and the RSI above 50.
Commerzbank’s Karen Jones is less equivocally bullish, claiming the current move is corrective and there is still a potential for a resumption of the downtrend.
It would require a break above the 200-day MA at 1.0843 to change their trend outlook to bullish.
“The rebound is gaining traction and will need to drop back below 1.0675 to alleviate immediate upside corrective pressure,” said Jones.