The EUR/USD exchange rate has retreated further from the 1.10 area and is quoted at 1.0892 ahead of the weekend. Technical analyst and forecast Richer Perry at Hantec Markets does however maintain an overall bullish stance on the pair.
After another attempt at the resistance of $1.1015 once more came up short yesterday (for a second successive session), the euro bulls are in an important moment.
Daily momentum indicators have been pulling decisively higher in recent sessions but the impetus is threatening to slowdown once more just at the wrong moment.
How they respond to being unable to breach this resistance could now be key for the near to medium term outlook.
The hourly EUR/USD chart certainly has its warnings now for the bulls. The emergence of negative divergences on hourly RSI and MACD lines is a concern as it suggests that upside momentum is waning.
Another early bout of dollar strength is weighing on EUR/USD again today. The support around $1.0915 needs to hold otherwise a corrective set up will have developed which would effectively neutralise EUR/USD within the range once more. The old pivot at $1.0809 would then come back into play.
We retain a broad positive bias within the range whilst the market holds above $1.0890 and this remains a key pivot area. The euro bulls who were so prominent in the earlier part of this week, need to show that they are more stronger than they were back around the early May failure. Otherwise a much deeper retreat within the range will be seen.
Geopolitics Thwarts Risk Rally, Dollar Regains Footing
At a time where markets are trying to build the momentum to take the next step forward in this recovery, growing geopolitical risk between the US and China is not ideal.
We are increasingly seeing the threat of renewing tensions between the world’s two most powerful economies.
Moves in the US Congress to sanction China over potential Hong Kong legislation adds to tensions that are already fraying after President Trump has been firing off over the COVID-19 blame game and interference into his re-election campaign.
Risk aversion is taking hold once more through markets (certainly not helped either by China reluctant to issue a 2020 GDP target). US Treasury yields are again heading lower, and the dollar gaining ground.
Closing lower yesterday, equities are again weaker today.
This renewed swing lower has come just as several key markets had been testing resistance of a risk recovery.
Wall Street indices are pulling back, EUR/USD is backing away from $1.1000 again, whilst Brent Crude oil is falling under its April highs.
How the bulls respond in these markets in the coming days could determine whether the multi-week ranges are set to continue to leave the risk recovery on ice.
In other news overnight, the Bank of Japan held an unscheduled meeting and kept policy unchanged with -0.1% rates and a 10 year yield target of zero.
Also, UK data has not been overly encouraging, where UK Retail Sales in April fell more than expected at -15.2% (ex-fuel) and public borrowing was way higher than expected at £61.4bn.