- EUR/USD recovery from the lowest since 2017 continued on Friday.
- Weaker US Dollar is seen as the main drive in the correction.
The EUR/USD pair posted on Friday the second consecutive daily gain. It climbed back above 1.1200, reaching the highest level in a week, on the back of another negative session for the US Dollar but risk sentiment improved. “Major global equity indices advanced today, reflecting investor appetite for risk assets, but not enough to salvage a tumultuous week battered by intensifying trade tensions, lackluster activity data and increased uncertainty on Brexit trajectory following UK PM May’s decision to quit.”
Again, lower US yields and weaker-than-expected US data (Durable Goods Orders) weigh on the US Dollar that lost ground across the board. The greenback ended the week under pressure after making a sharp reversal on Thursday and Friday’s losses.
“In effect, the fall in US rates has blunted the dollar advantage, but it has not taken over the relationship between the currencies. The macro-economic effects of the European economic slowdown and the potential damage from yet unsettled British departure continue to weigh heavily on the euro despite the shrinking rate advantage for the dollar”, said Joseph Trevisani, Senior Analyst at FXStreet.
EUR/USD technical outlook
According to Valeria Bednarik, Chief Analyst at FXStreet, the latest advance seems corrective, but warns the EUR/USD pair is technically bearish in the long-term perspective, still developing far below the daily descendant trend line coming from September high, currently at 1.1296. “In the weekly chart, the pair keeps developing below a bearish 20 SMA, which maintains its bearish slope below the larger ones. Technical indicators in the mentioned chart hold within negative levels, the RSI directionless at 43 and the Momentum aiming just modestly higher below the 100 level”.
The immediate resistance is 1.1265, where the pair topped twice this May, followed by the 1.1300 figure notes Bednarik. “Above this last, the bullish case will be a bit more sustainable. If the ongoing correction fails to continue, the risk will turn back south, with a break below 1.1100 exposing the 1.1020/40 price zone.”