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The EUR/USD exchange rate is quoted at 1.1332 at the time of writing on Tuesday, concerning the short-term outlook analyst and technical forecaster Richard Perry of Hantec Markets says there remains an appetite to buy into weakness.
The euro bulls continue to test the multi-week resistance between $1.1350/$1.1375 which has acted as a limit to their attempts to get real control on this market.
There is an appetite to buy into weakness that means EUR/USD is pressuring higher, however, there needs to be a release of the shackles to truly back a bull run.
Momentum indicators look primed and ready, with the Stochastics and RSI swinging higher in a positive bias, whilst MACD lines have converged above neutral, potentially ahead of a bull cross.
Yesterday’s close of $1.1340 was the highest close for a month and adds further evidence that the bulls are ready.
We look to buy into supported weakness. Support at $1.1255 needs to hold, but the bulls will want to build above $1.1300 now (shown on the hourly chart as a near term pivot). A close above $1.1375 would confirm the bulls in control to test $1.1420 and then the crucial $1.1490 March high comes into play.
There still seems to be a fine balance struck between whether markets lean positive or negative on any given session.
Sentiment fluctuates between bullish and bearish. Hopes for vaccine and treatment drugs are still able to boost sentiment, but the traction seems to be limited now.
The weight of concern comes with the economic impact on the US economy from rising COVID-19 infection rates. Consistently over 60,000 new cases per day, is driving the need to reverse re-opening measures.
The state of California closing bars, restaurants and other businesses is a concern for retail sales recovery and consumer confidence. The data for July and as Q3 develops is likely to reflect this and scale back expectations of economic recovery.
Add in a dose of concern over the tit-for tat relations between the US and China over Hong Kong, interests in the South China Sea and Huawei.
The risk recovery has been built for perfection and with reinfections growing in the US, it seems that a China recovery needs to be a heavy lifter for the global economy again.
China trade data out overnight has been encouraging, but Singapore reported a larger than expected decline in Q2 GDP and a move into recession for the first time since 2009.
UK GDP for May has also disappointed, a data miss driven by underperformance by the dominant services sector.
Any good news on the economic data front that markets were served in the past month, seems to be running dry. At the least, this makes it much harder for the risk rally in the weeks ahead.