Bottom line: EURUSD long term outlook remains bullish against 1.0636 support. The currency might have carved a potential top around 1.2000 handle and turn lower towards 1.1100 over the next few weeks.

 Fundamental Outlook:

EURUSD had slipped to 1.1750/54 lows before finding support. The exchange rate has managed to hit 1.1915 highs over the last week after ECB kept interest rates unchanged. Further, the Euro Zone Q2 GDP clocked in marginally better than expected at -11.8%. The exchange rate might remain under pressure if US-China tensions triggers another round of selloff in stocks.

GBPUSD has dropped over 720 pips since September 01, 2020 printing 1.2763 lows on Friday. The exchange rate collapsed on Brexit woes and could remain under pressure, going further. Watch out for the Employment numbers coming out tomorrow, unemployment rate might have marginally increased in July (4.1% Vs 3.9%).

FTSE had managed to rally over the last week by +3.25%, closing in at 6027. Futures are up today and trade above 6050 as we prepare to publish. Global Indices remain vulnerable over rising US-China trade wars; TikTok sale and other tech companies might trigger another round of risk aversion. The race for US Presidency might be another event risk over the next few weeks.

Technical Analysis:

EURUSD remains vulnerable for a bearish reversal after printing highs around 1.2010 levels. The currency might be preparing to break below 1.1754 lows and accelerate towards 1.1100 in the near term. Bears remain inclined to stay in control as long as 1.2010 is intact.

EURUSD had dropped through 1.0636 levels in March 2020. Since then, bulls have managed to carve an impulse rally all through 1.2 handle recently. Ideally, the impulse rally should be followed by a corrective drop as the guideline suggests.

The fibonacci 0.618 retracement of entire rally between 1.0636 and 1.2 is seen towards 1.1162 mark. High probability remains for a bullish turn, if prices manage to drop through that zone. A continued drop below 1.0930 would suggest a break below 1.0636 respectively.

Most traders might be preparing to initiate fresh short positions around 1.1900/50 levels, with a protective stop above 1.2000 and projected target towards 1.1100 respectively. Only a consistent break above 1.2 handle would change the structure.

Prepared by

Harsh Japee, Technical Analyst.

EURUSD Chart

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