Bottom line:  EURUSD medium term structure remains bullish until prices stay above 1.0636 mark. The currency has been drifting sideways since last several trading sessions as we await a breakout. The engulfing bullish pattern on the weekly chart still holds as bulls prepare to break above 1.1150 levels, going forward.

Fundamental Outlook:

EURUSD might reel under further pressure as it continues to consolidate since printing highs at 1.1500 levels around mid-April. The minutes of ECB Monetary Policy meeting later this week shall be closely monitored to see if more stimulus would be required. Furthermore, a re-emergence of US-China trade war tensions could be a negative for EURUSD, as safe haven US Dollar would be back in demand.

FTSE had closed lower by over -1.0% last week, as most Global Equities. The indice had dropped to 5635 lows on Thursday, before closing the week at 5907. Over the coming weeks, FTSE is expected to reel under further pressure as BREXIT fears return. As economies continue to re-open across the US and Europe, concerns remain over COVID-19 cases rising.

GBPUSD faced selling pressure on Friday and may continue as BREXIT fears return. As another round of negotiations between UK and the EU concluded on Friday, little or progress seem to have been made. The currency also faces uncertainty over rising tensions between the US and China amidst the ongoing COVID-19 crisis. The GBPUSD trades just above the 1.2100 mark as we write this article.

Technical Analysis:

EURUSD bulls still remain in control as prices trade above 1.0636 levels. It has been consolidating since last several trading sessions establishing a trading range of around 300 pips (1.0800 to 1.1000). We still favour a bullish break above 1.1150 mark, going forward. Bottom line is that prices must hold above 1.0700.

EURUSD is still confined between the recent upswing between 1.0636 and 1.1150 respectively. It has bounced higher from fibonacci 0.786 support around 1.0730 earlier. The currency can remain sideways for a while before breaking beyond 1.1150 and accelerate towards 1.1500, going forward.

RSI on the weekly chart is also showing bullish divergence since March 23, 2020. Hence, possibility remains for a push beyond 1.1500, which is strong resistance. A break higher would confirm that bulls are here to stay.

Traders might be willing to hold longs with stop below 1.0636 and upside targets as 1.1500 and higher. Alternately, a break below 1.0636 would be encouraging for bears and push lower towards 1.0340 interim support.

Prepared by

Harsh Japee, Technical Analyst.

EURUSD Chart

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