The Euro has done well in the last two days. So far this week has been quite positive for the European currency. The rebound, which began on Friday, continued during yesterday’s trading session. Although the short traders tried to push the price lower in the morning hours, the EUR/USD stopped the movement on the downside at the 1.0830 level. Here the price was caught by the moving average. Although it initially looked as if the support would break and the Euro would continue to fall, this did not happen. Until the early afternoon, the EUR/USD then only moved sideways.
But when consumer confidence from the USA was released, which was weaker than expected, the Euro received a fresh boost against the US Dollar. The bulls became active again and the exchange rate gained strength. Yesterday, the pair traded at the high of 1.0890. However, this level proved to be too strong for the time being, and the Euro subsequently corrected slightly. Tonight, the EUR/USD moved only sideways. There was not much activity in the market, and Asian traders have been holding back.
How far can the Euro rise against the US Dollar today?
The corona virus continues to spread in Europe (in the meantime, cases have also been reported in Austria, Spain, Germany and Switzerland). Fears in the global financial markets are increasing, but the Euro vs. the US Dollar is rising. (click here for Markus Fugmann`s comment on this) And why? Quite simply, the pair has already been punished so severely in recent weeks that a rebound is now a natural reaction. Traders who were active on the short side are now smoothing out their positions, which automatically relieves the Euro.
In addition, carry trades are being liquidated. Investors who had borrowed Euros at virtually zero interest rates in order to invest them in the Dollar area (or other currency areas) at a higher rate of interest are closing their positions. That in view of the rapidly emerging risk aversion. The Euro bulls in turn place their long orders and the price moves slightly upwards. The economic figures from the USA are also no longer so euphoric.
Of course, there can be no talk of a trend reversal for a long time yet. However, those who have a short-term orientation can currently also venture the long direction. At the moment, the Euro is at approx. 1.0870 against the USD (Wednesday morning). The question now is whether the rebound can be extended further, or whether the counter-reaction is already slowly coming to an end. As the indicators remain positive in the medium term, the pair still has some upward momentum. All traders’ eyes are now naturally looking to the 1.0900 level. Until then, the EUR/USD still has potential.
However, to reach this level, the resistance at 1.0891 (38.2% Fibonacci retracement) must first break. Should this happen today, and the Euro gain fresh momentum against the US Dollar, the 1.0900 “big figure” will likely be tested. This area will be important for the EUR/USD. It is a psychological mark where many orders are likely to be placed. There may be an exciting battle between the bulls and the bears. If the resistance should break, the price will still have room to go up to 1.0928. However, the air will already be thin here, so at this level it is recommended to close the long positions and take the profits.
On the other hand, if the 1.0891 level holds, the market may be disappointed. In that case, the Euro vs. the US Dollar would likely fall again. On the downside, the pair is waiting for the first important support at 1.0835. Should this level also break, the way to 1.0800 will be clear. Those who have a short-term orientation today and are working with a tight stop-loss can speculate on a break-out on the upper side. The chances for the Euro against the USD are still quite good.
The analyses shown here do not constitute investment advice and are therefore not a recommendation to buy or sell a security, a futures contract or any other financial instrument. Past performance is no guarantee of future results. The analyses provided are for information purposes only and cannot replace an individual consultation. Liability for direct or indirect consequences of these suggestions is therefore excluded.