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The EUR/USD exchange rate is at 1.1653 at the time of writing on Thursday as a near-term down move extends. Analyst and technical forecaster Richard Perry of Hantec Markets says momentum is increasingly corrective.
The dollar rally continues to drag EUR/USD lower.
A breakdown below key medium term support at 1.1695 was certainly questioned during yesterday’s session, but the decisive move lower into the close really does confirm now that the outlook has changed.
The closing breach of 1.1695 completes a top pattern of around 300 pips and implies a retreat towards 1.1400.
Given that we see this as a bull market correction, the old breakouts of 1.1420/1.1490 are now a realistic downside target in the coming weeks.
Momentum is increasingly correctively configured with near term rallies now a chance to sell.
The old support band 1.1695/1.1750 is now an area of overhead supply housing stale bulls who bought the dips throughout August and September.
These are now a source of sellers. The fact that EUR/USD had such a strong run higher through July means that there is little real support until 1.1420/1.1490 now.
Momentum is really taking hold in this risk off, dollar rally now.
In the last few days there has been a real shift in outlook, with the fears mounting over the implications of COVID second waves in countries across Europe and the US.
Safe haven flows continue and the US dollar is benefitting from that.
The significant dollar negative positioning that has developed over the past few months is driving traders into a short-covering dollar rally now.
The comments of Fed chair Powell have hardly helped to stem the tide either.
Powell noted yesterday that fiscal support for the economy is vital in the battle against the impact of the pandemic.
However, it seems increasingly unlikely that Congress will be able to agree anything this side of the Presidential election in November.
That is not good for risk and helps to further fuel this flood back into the dollar.
UK Chancellor of the Exchequer Sunak (finance minister) is though expected to announce new fiscal measures for the UK today, but it is in the US Congress where markets would really take notice.
Fed chair Powell speaks once more today, this time with Treasury Secretary Mnuchin too. Will Mnuchin signal some much needed fiscal response?