Summary:
- EURUSD trapped in range trading after both Fed and ECB have embraced a more dovish tilt
- A corrective pullback could be on the cards relatively soon
- A major long-term resistance in sight
The major currency pair has been climbing since the start of the new quarter after both the Federal Reserve and the European Central Bank had embraced a more dovish stance. While the ongoing upward move seems to be justified by demanding US dollar valuation as well as changes in the bond market, a pullback in the near-term could be in the offing looking at the H4 chart. Such a move might occur in the vicinity of 1.1340, the level coinciding with the upper bounce of the bullish channel. Moreover, the EUR speculative shorts also seem to be stretched signalling a possible reversal ahead. Although this could be a possible scenario in the medium-term, before it happens one may count on a downward move toward the lower boundary of the mentioned channel.
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The daily chart looks more encouragingly from a bulls’ standpoint as they may target at 1.14 or so. This level is justified by the medium-term downward channel the pair has been moving within so far this year. Having in mind that the ECB is a long way off from any monetary tightening one may suppose that space for appreciation for the shared currency is contained. Therefore, after the pair reaches the above-mentioned target some buyers may want to cash in on their longs. On the other hand, a breakout of 1.14 could set the stage for a rally even toward 1.18.
Source: xStation5
In the long-term the euro still looks like one of the ‘cheapest’ major currency. The pair failed to break below 1.12 several times suggesting that buyers tend to be mobilized enough to prevent such a move. Therefore, we think that the upward trend could prevail over the months to come barring a severe downturn/recession which tends to increase demand for safe haven assets like the buck. However, in the upcoming weeks some important technical levels might matter. First of all, bulls needs to deal with the 25WMA, followed by the bearish channel (better visible in the daily chart) and the 50% retracement of the huge rally between November 2016 and January 2018. Should the price fail to move through these levels, one cannot rule out a larger pullback back toward 1.12 or so.
Source: xStation5
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