EUR/USD Daily Forecast – Resistance Confluence in Play
EUR/USD at Resistance But Momentum Remains Firmly to Upside
The markets have been volatile over the past few sessions as market participants digest developments in the trade war between China and the US. Equities fell sharply yesterday alongside US Treasury yields and the dollar has been dragged lower.
The markets are ramping up bets for further rate cuts in the US, although this is not having the same impact as it did a few weeks ago.
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The logic before was that trade concerns warranted a rate cut which was driving risk assets higher and the dollar lower. However, ever since Trump announced new tariff’s, the focus has been on the negative impact that stands to have on the economy rather than how it stands to gains from any easing measures.
In the currency markets, it is the safe-haven currencies that are absorbing a bulk of the volatility introduced by Trump’s latest announcement. While EUR/USD has gained, the dollar has not been broadly weaker against its major counterparts. AUD/USD, for example, is consolidating near yearly lows.
EUR/USD has come into some resistance here from several moving averages. The pair has already pared back early day gains and last traded relatively unchanged on the day.
In terms of economic data, German factory orders were released earlier today and came in ahead of expectations with a 2.5% rise in new purchase in June. There are two Fed member speeches later in the US sessions. Considering that the futures markets have shown a sharp increase in probabilities for further cuts at the next meeting, the speeches will be important in assessing how the Fed’s view might have changed since the last meeting.
Technical Analysis
Resistance in EUR/USD comes from the 50 and 100-day moving averages which have converged in around the 1.1230 area. Further, the 200 moving average on a 4-hour chart has been holding the pair on smaller time frames.
The pair erased early day gains. It might be too early to consider the daily close, but if EUR/USD does close near current levels, it would set up a reversal candle on a daily chart.
There is a horizontal level at 1.1188 which has held an earlier decline already. This level is the first area of support. I think it is important to note that a bearish engulfing candle has printed on a 4-hour chart. This could keep pressure on the pair ahead of the North American open.
Bottom Line
- EUR/USD has run into resistance from moving averages on a daily and 4-hour chart.
- Prior to seeing sellers from resistance, the pair had an impressive run. This momentum suggests dips will be bought.
- A bearish engulfing candle has printed on a 4-hour chart.