Since jumping to higher ground on Bernanke’s dovish words, EUR/USD has established itself in a triangle. On the topside, it is capped by a moderate uptrend resistance line. The pair is unable to sit above 1.32. On the downside, there is a clear steep uptrend resistance line that follows the pair since it made a correction to just under 1.30.
The lines meet on July 29th, but the pair might make a breakout beforehand – before the end of the week, but to which direction? Here is how it looks on the charts:
Update: the pair is now attempting to break above the moderate uptrend resistance line, and the pair trades at 1.3222 after already touching 1.3230.
On one hand, QE tapering might already priced in, so the dollar has limited scope for rises. We have seen the greenback weakening against many currencies, with GBP and CAD making the most of it.
On the other hand, the euro-zone isn’t doing so well (as issues from Portugal, Greece and Spain show), and this limits the euro’s gains. All in all, the pair is stuck between the fundamentals and squeezed within the triangle.
European PMIs could provide a clue and so could the US new home sales. Further resistance appears at 1.3255 and 1.3350. Support is at 1.3175, with much more meaningful support at 1.31.
For more levels, see the EURUSD forecast.
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