Today we shall take a look at the EUR/USD currency pair. Over the past ten days the pair has been trading within a bullish trend. We currently find it at its highest level in about a month, just below 1.18.
The European single currency might extend its advance against the US dollar this week. European fundamentals have been steady, which allows the euro to enjoy a degree of stability, while the dollar weakened on the Fed’s surprisingly dovish tone at Friday’s Jackson Hole Symposium. It seems that the European Central Bank’s persistent dovishness is already fully priced in, so it lacks the potential to weaken the euro. In addition, the EU’s strongest economy, Germany, is getting ready for elections, which seem more likely to be won by the center-left SPD, a party associated with more ambitious spending plans. Whenever the outcome of an election is safely predictable, the vote tends to go under the radar and not have a large impact on the euro. Thus, investors remain relatively confident in the euro for now.
As for the US dollar, it weakened last week when Federal Reserve Chair Jerome Powell spoke at the conclusion of the Jackson Hole Symposium. Many had expected that Powell would reveal the timeline for asset purchases tapering, but his comments were more dovish than that. He confirmed that there may be tapering this year, but did not commit to a schedule (experts estimate that bond purchases will be reduced starting November). Powell also noted that early tapering does not mean an interest rate hike. The reason for the surprisingly dovish tone of the Fed is the recent worsening in the coronavirus situation, particularly the serious outbreak in the United States. Thus, the reserve currency has weakened and will likely stay this way for a few days.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1796, with the price currently trading slightly above it. The daily support levels lie at 1.1791 and 1.1785. The daily resistances are located at 1.1802 and 1.1807. The indicators of technical analysis strongly agree in recommending a buy position today.
