Is EUR/USD really out of the niche?


ECB talk of an end to negative interest rates by Q3 with the possibility of positive rates in the not-too-distant future boosted EUR/USD after an abysmal year in terms of performance. The recent consolidation in US short-term yields also provided support for the single currency, which broke above the previous high of 1.06420 from May 5 on Monday. Has EUR/USD really gone from a downtrend to an uptrend?

Maybe, but you may want to wait for more confirmation that things have changed, before raising your beliefs. For one thing, regardless of the higher period, be it daily or weekly, EUR/USD is well below its 200 exponential moving averages, which are still falling. Should the price break past last March’s weekly high of 1.11849, I would certainly have much more confidence that something big is brewing.

EUR/USD, however, is still a considerable distance from these levels and is of no use to those considering buy orders. For them, the 50% and 61.8% Fibonacci retracement levels of 1.07774 and 1.08773, respectively (between the March high of 1.11849 and the May low of 1.03492) could be more interesting.

If these levels fail to hold as resistance, the chances of the EUR/USD truly changing trend will likely increase dramatically. They can also be the perfect place to increase your positions if you are brave enough to go long EUR/USD at recent levels. That said, given the size of the latest downside impulse wave compared to the previous corrective wave, there is a good chance that EUR/USD will find itself in a range for a reasonable period of time, above all potential change in trend.


About Author

Comments are closed.