The EUR/USD currency pair has been continuing its climb higher since the market opened this week. Action in the Forex market today has shown more direction and volatility since last week. It is extremely likely to see even more action with the five central bank policy meetings which will be held this week, on top of the likely signing of the Memorandum of Understanding between the USA and Iran this Friday.
There are several factors going on which will impact interest rates, inflation, and risk sentiment. These are the kind of things that really move the Forex market.
Markets are reaching an important juncture for several reasons, all of which could affect the outlook of the EUR/USD currency pair:
The exact terms of the Memorandum of Understanding should be revealed this Friday. What is clear is that the Strait of Hormuz will be fully open, which could help to weaken the US Dollar.
Strong moves higher in stock markets, and in risk sentiment generally, will probably produce a tailwind for this currency pair to advance.
There will be a central bank meeting at the US Federal Reserve this week, which can affect sentiment or even fundamentals on the USD.
EUR/USD Technical Analysis
Since this week’s market open, we have seen the price advance to a fresh one-week high price, making a key higher low off the new support level at $1.1596, although it seems to be consolidating above that level. The nearest resistance level at $1.1623 has not even been tested yet, so there is a hint that the bullish momentum is slowing.
It is worth noting that the US Dollar Index is a bit lower, but even the emerging Iran deal has not had that much of an effect upon the relative value of that currency. It may be that the markets are waiting for the Fed’s policy meeting to take place before finding more direction. Technically, the Dollar Index is within a long-term consolidation pattern, so it might struggle to break out of that or to move smoothly within that area.
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I think the price action is quite likely to respect the support level at $1.1596, but it might be wise to scalp or otherwise be conservative with profit targets as we may not see much more decisive directional movement over the rest of today. I think we will see more movement over the rest of this week, however.
My Take on EUR/USD
There are reasons to expect that the price here is more likely to go up than down over the short term. The ECB gave the Euro a small bid following its minor hawkish tilt last week, and the risk-on sentiment is likely to put pressure on the US Dollar as the price of Crude Oil comes down from reducing tensions in the Persian Gulf.
I think the best trade opportunity which is likely to set up today would be a long trade from a bullish bounce following a failed test of the support level at $1.1696.
Review, Support & Resistance Levels
In my previous EUR/USD analysis on 10th June, I thought that the EUR/USD currency pair was likely to test $1.1577 if CPI was a bit lower than expected, which almost happened so that wasn’t a bad call.
Risk 0.75%.
Trades may only be taken prior to 5pm London time.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1624, $1.1636, $1.1642.
Place the stop loss 1 pip above the local swing high.
Move the stop loss to break even once the trade is 20 pips in profit.
Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1596, $1.1587, or $1.1557.
Place the stop loss 1 pip below the local swing low.
Move the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the USD.
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