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EUR/USD Forecast: Resistance at $1.1350 Now Key

Euro rate

Image © European Central Bank

The EUR/USD exchange rate is seen at 1.1288 on Tuesday, having been as high as 1.1345 over the course of the past 24 hours. Analyst and technical forecaster Richard Perry at Hantec Markets says there is clearly more the bulls need to do in order to break into fresh territory.

After more than a week lacking conviction, a decisive positive candlestick suggests that the bulls are looking to make a move again. EUR/USD has been ranging for around a month now.

Support forming between $1.1165/$1.1190 has provided the platform, however, the bulls have been unable to take on the move higher, to push above resistance initially at $1.1350 and then the June high of $1.1420.

So it is notable that the resistance at $1.1350 once more held back the bulls yesterday as they pulled back slightly into the close.

EURUSD chart

There is clearly more that they need to do. Momentum indicators are looking to build on an improvement, but again, need more to suggest this is the time that a breakout will be seen.

Trading in the Asian session shows a market struggling to hold traction from yesterday and the hourly chart shows a breach of initial support at $1.1280/$1.1300 would see the move again disappointingly unwind.

A closing break above $1.1350 would be the move the bulls are looking for to signal real conviction is returning.

EURUSD forecasts

Market Confidence Remains Fragile

It would appear that yesterday’s rally was drive just on the notion that China’s state run media encouraged its people to buy stocks to foster a “healthy bull run”.

So perhaps it is of little surprise that a rally fuelled by hot air looks set for a retracement today. China may have managed to pull further equity gains, but other Asian markets are more cautious, also futures elsewhere are turning back.

The focus in recent weeks has been far more on the concern that COVID-19 infection rates are rising alarmingly in the US and hampering the re-opening of the economy.

There are also pockets of lockdowns being reinstated across other countries such as Germany, Spain and Australia.

A bull rally seemingly priced for a perfect global economic recovery may need to prepare for disappointment. It is our view that disappointment could become a theme for Q3. The headline of the ISM Non-Manufacturing data, beating expectations at over 57 sounds great.

However, this only notes expansion versus the month of May, which could simply be negligible but broad based.

Also the employment component remains at 43 and in contraction. As many US states are hit by rising infection rates, July and through Q3 it could be a difficult period for a sustainable economic recovery.

Sentiment across major markets has a negative bias today. Yields are falling back, the dollar is looking to reclaim some ground lost from yesterday’s risk rally. Oil is lower and equities are lower as higher risk assets are hit.

The Aussie is also in the firing line today as the Reserve Bank of Australia held rates at +0.25% and did little to change its recent message of forward guidance (will not increase rates until there is progress towards employment and inflation goals).

With the city of Melbourne re-imposing a lockdown, this is hitting the Aussie today.