Image © European Central Bank
The EUR/USD exchange rate is quoted at 1.1246 at the time of writing as the Eurozone's single currency gets off to a 0.40% advance at the start of the new week. Richard Perry, an analyst and technical forecaster at Hantec Markets says although EUR/USD appears to be consolidating, weakness should offer chances to buy.
With the euro rebound faltering at $1.1350 on EUR/USD, the market is developing into a new consolidation pattern.
The breakout support of $1.1145 held a recent unwind and a choppy week last week could be setting the scene for a difficult phase of trading where the market lacks decisive direction.
Friday’s doji candle and open higher today has neutralised any selling pressure that had previously threatened, and support is now forming between $1.1165/$1.1190.
The daily RSI holding above 50 is encouraging for this support to build as a platform now, whilst Stochastics are also looking to bottom.
This would suggest that weakness towards $1.1200 is a chance to buy for near term positions towards $1.1350 again (resistance for the past couple of weeks).
Markets Subject to Ongoing Bouts of Risk Aversion
Risk aversion has taken more of a grip on major markets in recent sessions as a drip feed of negative newsflow surrounding second wave infection rates of COVID-19 has increased.
Infection rates rising again in Japan, Australia and Germany are a concern, but alarming increases in the infection rate curves across several US states have made traders sit up and take note.
The risk recovery from the pandemic cannot be a one way bet. The emergence of the US from economic shutdown will need to be re-calculated as several states re-instate elements of lockdown procedure. The weight of this on the risk recovery is growing. The decline of longer date Treasury yields (and curve flattening) is a signal for risk aversion and risk asset plays are increasingly struggling.
Wall Street is faltering back towards testing key technical breakout support, whilst oil is also slipping as the prospects of demand recovery are scaled back.
The interesting mover here is how the market views the US dollar. Does the dollar begin to lose its safe haven status if the US is seen to be the major focus of a second wave?
This morning we see the dollar pressured across major forex, whilst equities are struggling (a degree of catch up on Wall Street losses from Friday though).