Today we shall take a look at the EUR/USD currency pair. The euro started putting up resistance against the dollar once again the weekend before last, and over the past ten days managed to push the pair to its highest level in five weeks, currently trading just below 1.19.
Things are finally looking up for the European single currency. Last week the eurozone delivered some crucial data which contributed to the strengthening of the euro. First and foremost, GDP growth statistics were overall pretty good, with year on year GDP rising by a robust 13.7%. Moreover, while July core inflation narrowly missed the forecast of 0.8% and came in at 0.7% instead, the YoY broad inflation rate was 2.2%, surpassing the ECB’s target level of 2% for the first time in years. One reading above 2% is not going to change the ECB’s extremely dovish stance, but it will likely ask the central bank to keep a close eye on the economy, which may be recovering a bit faster than the ECB expected. Thus, the end of the week's slight drop in the rate of the EUR/USD was most likely due to profit-taking, not a trend reversal. We expect the euro to remain strong this week too. There will be some PMI and retail sales data from the eurozone this week but it most probably will not be super important to the euro, considering how relevant last week’s reports still are.
As for the US dollar, its outlook at the moment is a bit worse than the euro’s. The United States is experiencing another coronavirus breakout, particularly in regions with low vaccination rates. Last week it had more than one day with 100K new cases declared, the highest daily numbers since February. This is causing some concern over new lockdowns and a hitch in the economic recovery of the US. Plus, last week’s data on inflation and GDP growth was disappointing, confirming that the Federal Reserve was correct in its patience towards monetary policy. The dollar will likely trade quietly this week in anticipation of Friday’s July unemployment rate and non-farm payrolls data.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1866, with the price currently trading above it. The daily support levels lie at 1.1862 and 1.1858. The daily resistances are located at 1.1874 and 1.1878, both of them overcome. The indicators of technical analysis strongly agree in recommending a buy position today.
