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The EUR/USD exchange rate has started the week in firm fashion, pushing back up to 1.13. Analyst and technical forecaster Richard Perry of Hantec Markets says however that a key level of resistance must be broken if further gains are to be unlocked.
However, with U.S. trading coming back into force today, the morning has begun with a bullish bias to EUR/USD. The question is, can this now be translated to sustainable direction?
There is still a legacy of what is now a span of six small bodied candles, where a lack of conviction has been dominant on the pair and this needs to be shaken off.
Several times over the past week, it looked as though direction was forming only to be retraced once more.
A strong and decisive daily candle would begin to suggest conviction is returning this week.
A +40 pip move higher this morning is into initial resistance now between $1.1290/$1.1300 where intraday rallies over the past week or so have floundered.
This resistance needs to be broken and a new basis of support to be formed in order for this to be considered more than another part of the near term consolidation.
Seeing RSI sustainably in the 60s, whilst MACD lines bottom will also add to a sense of improvement and to buy into intraday weakness.
However, the barriers overhead need to be broken if the bulls are to make serious progress. Beyond $1.1300, there is a barrier at $1.1350 and then $1.1420. The bulls will point to the support now starting to kick in above the $1.1165/$1.1190 band which is growing in importance.
There is a distinctly risk positive bias that has started the new week. There does not seem to be any significant reason behind the move (so perhaps a degree of caution needs to be taken here), but Asian equity markets have been decisively bid overnight.
Chinese media have been pushing a “bull market” narrative over the weekend, and it is interesting to see the Shanghai Composite over +5% higher today.
This bullish theme has leaked into forex major which are taking a risk positive skew which is benefitting higher beta majors at the expense of the safer havens.
The Aussie and Kiwi are strong outperformers (this coming a day ahead of he Reserve Bank of Australia expected to talk up the economic rebound prospects for Australia). After Friday’s public holiday in the US, we see Treasury yields picking up too (along the risk positive theme).
However, it is important to note that many of these moves are still within ranging patterns and there would likely need to be something more substantial for a decisive breakout of recent consolidations that have taken hold across many major markets.
For this morning, traders appear to be looking past elevated levels of COVID-19 infections, but if the death numbers accelerate, this may not last long.