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EUR/USD Retesting Violated Upward Trendline - Brace for a Sell Trade! 


The EUR/USD currency pair extended its previous day winning streak and rose to the session highs near 1.1345, mainly due to the risk-on market sentiment, which initially undermined the broad-based U.S. dollar and contributed to the currency pair gains. The EUR/USD is trading at 1.1326 and consolidates in the range between the 1.1320 - 1.1349. However, traders are cautious about placing any strong position and preferring to wait for the German inflation number for May and the Zew Survey indices for June.

At the USD front, the broad-based U.S. dollar remains bearish on the day. That is mainly due to the U.S. Federal Reserve's announcement that it would start purchasing a more diverse range of investment-grade U.S. corporate bonds, which initially boosted the risk-on market sentiment and made the U.S. dollar weaker. However, the investors seem relaxed as the Federal Reserve promised to secure companies by injecting the cash and ensuring credit market liquidity due to the economic impacts of the COVID-19 virus. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.23% to 96.425 by 11:40 PM ET (4:40 AM GMT).

Besides this, the upbeat tone in the trading market was further bolstered by the fresh optimism about US-China patch-up triggered by the latest statement that the U.S. Secretary of State Mike Pompeo decided to meet with the Chinese delegation at a U.S. military base in Hawaii during this week to discuss the long-lasting conflicting relations between the two biggest economies in the world.

On the other hand, the White House (W.H.) Adviser Larry Kudlow recently delivered positive vibes while saying that 2021 could be a developing year, wherein we could see a V-shaped recovery. As well as, he suggested that there is no need to even thinking about renewed lockdowns restrictions, which eventually boosted the risk-on market sentiment and contributed to the U.S. dollar losses.

As per the latest report that the Trump administration is expected to inject approximately $1 trillion infrastructure proposal in order to help the economy recover from the coronavirus-induced slump also helped the risk sentiment, as in result, the futures tied to the S&P 500, which was already up about 0.5% during the Asian session, is now extended its gains to more than 1.5% gain.

From the forecasted perspective, the headline Economic Sentiment Index is expected to recover to 60.0 in June as against 51.0 figures booked in the previous month. In the meantime, the Current Situation Sub-Index is expected to come at -84.7 against a -93.5 number recorded last month. However, the shared currency could pick further bids toward the 1.1364 (daily classic R1) if the German data hit estimates.

Whereas, the EUR/USD currency pair could lose its bullish trend if China, the U.S., or any European nation reports a significant rise in the number of new coronavirus cases. Looking forward, the U.S. dollar is expected to remain bearish, keeping EUR/USD better bid. At the data front, the German inflation number for May and the Zew Survey indices for June is scheduled to release will be key to watch. On the other hand, the focus would be on the U.S. Retail Sales (May) and Industrial Production (May).

Daily Support and Resistance

S1 1.1085

S2 1.119

S3 1.126

Pivot Point 1.1296

R1 1.1366

R2 1.1402

R3 1.1508

Technically, the EUR/USD is facing resistance at 1.1295 area; below this, the next support level is likely to hold around 1.1235 level. Continuation of a sell trade can lead EUR/USD price towards 1.1156 support. On the way, the EUR/USD may find support at 50 EMA level around 1.1280 level. Let's consider staying bearish below 1.1295 level today. Good luck!

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