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EUR/USD Trades in a Downward Channel - Brace to Trade a Breakout! 


The EUR/USD currency pair has succeeded in extending its early-day winning streak and took further bids well above 1.1800 level, mainly due to the broad-based U.S. dollar fresh weakness, triggered by the upbeat market trading sentiment. The U.S. -China trade optimism and risk-on are strengthening gains in EUR/USD pair. Simultaneously, the better mood in the financial markets is acting as a drag on the safe-haven greenback, which kept the currency higher. However, the risk-on market sentiment could be attributed to fresh US-China trade optimism and positive news concerning the coronavirus vaccine front. On the contrary, the on-going hike in Germany's new infections becomes the key factor that kept the lid on any additional gains in the currency pair.

At the moment, the EUR/USD currency pair is currently trading at 1.1817 and consolidating in the range between 1.1784 - 1.1819. However, traders are keenly awaiting the week's Jackson Hole conferences where Federal Reserve's (Fed) President Jerome Powell will speak about the central bank's long-awaited monetary policy framework review, which will focus on inflation.

However, the market trading sentiment got an additional boost from the reports that raised the hopes for a new COVID-19 treatment on Sunday. The U.S. Food and Drug Administration (FDA) allowing emergency use approval on Sunday for a potential treatment that uses blood plasma from recovered patients. This, in turn, underpinned the market trading sentiment. The latest positive news over the US-China trade talks also exerted a positive impact on the market trading sentiment.

Despite the on-going tussle between the US-China over the TikTok and Huawei issue, the Dragon Nation recently confirmed that the trade deal between the US-CHina remains intact. He further added that China and the U.S. had a constructive conversation on the trade agreement. As per the keywords, "China says both sides agreed to continue pushing forward implementation of phase 1 trade deal." This, in turn, the buying pressure around the shared currency is picking up the pace on the day and pushing EUR/USD higher above 1.18 marks.

As in result, the futures tied to the S&P 500 reporting record highs gains, the major Asian indices like Japan's Nikkei and South Korea's Kospi are up at least 1% each. In the meantime, the Chinese stocks are also flashing green but erased some of its gains from session highs.

On the contrary, the number of valid coronavirus cases increased to 234,852, with a total of 9,277 deaths, as per the German disease and epidemic control center, Robert Koch Institute (RKI) report. In the meantime, the cases were raised by 1,278 in Germany on the day against Monday's +711. Whereas the death toll also increased by 5. It is worth mentioning that Germany recorded its highest number of new COVID-19 cases during the weekend in almost 4-months. The cases increased by 2,034, mainly after the social events and returning travelers from abroad. However, these on-going fears did not leave any major impact on the currency pair, at least for now.

Moving on, the gains in the currency pair could be short-lived or temporary if the final reading for the German second gross domestic product misses preliminary estimates by a big margin. Moreover, the focus would be on the coming forward-looking German IFO – Expectations index, which is due at 08:00 GMT. Likewise, the above-forecast IFO data may invite stronger buying pressure around the single currency.

Looking forward, the German IFO survey for August is scheduled for release later today at 0800 GMT. Thus, the headline IFO Business Climate Index is seen improving to 92.0 versus 90.5 previously. The market traders will keep their focus on the U.S. Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole symposium scheduled on Thursday.

Daily Support and Resistance

S1 1.1678

S2 1.1744

S3 1.1769

Pivot Point 1.1809

R1 1.1834

R2 1.1875

R3 1.194

The EUR/USD is consolidating at 1.1825 level, and it's expected to gain an immediate resistance at 1.1850 mark. On the higher side, the EUR/USD is trading in a downward channel extending an immediate resistance at 1.1825 level. On the higher side, the bullish crossover of the 50 EMA resistance level can extend buying until 1.1855, and above this, the next resistance stays at 1.1954. Conversely, a bearish breakout of the 1.1786 level can trigger selling unto 1.1713 level. Good luck!

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