Today we shall take a look at the EUR/USD currency pair. Since the end of May, the pair has been riding a bullish momentum, with the rates reaching levels from early March over the weekend.
At the moment the European single currency is doing quite well, recovering to levels last seen before Europe was caught in the midst of the coronavirus pandemic and had to impose strict lockdowns that essentially froze economic growth. The keyword bringing support to the euro right now is stimulus. Normally a currency is expected to weaken when the monetary policy becomes dovish. But due to the slumping economic indicators as a result from the pandemic, stimulus now means a faster recovery, and that is boosting the euro. This week, EU member states will discuss the European Commission’s stimulus plan. Countries like Finland have already stated they are ready to reject it, but that doesn’t mean the plan won’t be revised and adapted until it gets to a point where it can be unanimously agreed upon. This conversation will likely influence the euro’s movement over the next few weeks. Other data, such as this week’s industrial reports or GDP reading, will pale in comparison. In other words, we expect the euro to remain strong for now.
Not much has changed for the US dollar. The reserve currency remains stable due to signs of economic recovery in the United States. Though last Thursday’s data showed job loss is not recovering as fast as expected, Friday brought two major positive surprises. First, the non-farming payrolls were expected to be minus 8 million, but came at a positive 2.5 million. Secondly, the predictions for the unemployment rate were that it had dropped to almost 20% but the reading came in at 13.3% instead. Although this is still bad, it’s definitely much better than investors had feared. So the dollar is doing well; it’s allowing the euro to strengthen at present because it had been dominant for far too long. Plus, the demand for safe assets (like the USD) is not too high right now, even though the markets expect the relations between the US and China to worsen. If that happens, the dollar might strengthen again.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1308, with the price currently trading below it. The daily support levels lie at 1.1296 and 1.1278. The daily resistances are located at 1.1327 and 1.1338. The indicators of technical analysis are confident in strongly recommending a buy position today.
