Today we shall take a look at the EUR/USD currency pair. So far it appears that August is proving more challenging for the pair than July did; the trend is far more volatile and not as confidently bullish as before.
All in all, not much has changed for the European single currency. Last month’s consensus among EU member states to accept the European Commission’s recovery fund proposal is set to provide long-term support for the euro. In addition, fundamental reports from the eurozone have also shown clear signs of an economic recovery. The European Central Bank is not likely to change the eurozone’s interest rates anytime soon but they are already low enough to support economic growth. Thus, there is no reason to expect trouble in the European Union, or problems with the euro. The bullish trend is likely to resume as soon as the dollar comes under fire again.
The American dollar is currently under the influence of many different factors pulling in various directions. In general, a soft approach to monetary policy from the Federal Reserve and additional stimulus packages from the government will both push the dollar further down. The Fed has promised as much; meanwhile, the government is struggling to agree on a new stimulus bill. Thus, the current rally that the dollar is showing could merely be a result of the reserve currency taking a break from the massive stimulus packages that weakened it over the past couple of months. Still, the government will most likely come up with a plan eventually and provide more stimulus packages, so the USD will be forced to weaken again. Until that happens, we may see a modest recovery.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1783, with the price currently trading below it. The daily support levels lie at 1.1773 and 1.1764. The daily resistances are located at 1.1792 and 1.1802. The indicators of technical analysis are confident in strongly recommending a buy position today.
