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The EUR/USD exchange rate has finally cleared the 1.10 hurdle and is quoted at 1.1130 ahead of the weekend. Analyst and technical forecaster Richard Perry at Hantec Markets says he looks to now use an unwind within the pair's channel as a chance to buy.
Throughout the past few sessions the euro has been increasingly positioning for an upside breakout above $1.1015.
Yesterday’s solid bullish candle with a decisive close above $1.1015 signals a key shift in outlook for a pair that has been rangebound for the past eight weeks.
It completes a rectangle breakout and implies around +250 pips of upside target towards $1.1250. With the breakout continuing today, the next key test will be the $1.1145 March lower high.
The impressive move comes with the confirmation of momentum indicators, where RSI is now into the 60s (an 11 week high), Stochastics strong above 80 and MACD lines accelerating above neutral.
We still note the tendency for intraday pullbacks and with the market around the top of what is now effectively a three week uptrend channel, this could limit the immediate scope for upside potential.
We would look to now use an unwind within this channel as a chance to buy.
The hourly chart shows good momentum with the breakout support now around $1.0990/$1.1030 which is a near term buy zone.
Support at $1.0930 is also an important higher low.
Markets: All Eyes on Trump's Response to China's Advance on Hong Kong
For the past few days, markets have been building with anticipation of an impending escalation of tensions between the US and China.
Whilst equity markets have been positive with focus on COVID-19 vaccines and economy re-openings, looking large overhead has been the US response to China over its treatment of Hong Kong.
Tension is being cranked up today as President Trump is set to hold a press conference to announce the US response to China imposing its will over Hong Kong with a security bill.
If he announces the intention for punitive sanctions on China and the status of Hong Kong, then it could really hit risk appetite. Market sentiment has taken a hit overnight in anticipation.
Equities fell back into the close on Wall Street and futures are pointing lower this morning.
Safe haven asset plays are benefitting, with US Treasury yields lower, the Japanese yen outperforming major currencies, and a rebound continuing on gold. What is interesting in all this is that the dollar is suffering amidst this move. Historically, where US/China tensions flare up, the dollar has been strong.
For now, this does not seem to be the case. We see that the risk rally that had held such positive momentum earlier in the week is hitting the buffers today and markets are on a knife edge ahead of Trump’s press conference.
Furthermore, overnight Japanese data for April on retail sales and industrial production coming in worse than expected has played into a more cautious outlook across major markets, although May’s Japanese consumer confidence did come in slightly ahead of forecast.