Since June 26, the EURUSD exchange rate has shown an upward trend despite a few brief corrections. Last week's retracement was triggered by a bearish Evening Star candlestick pattern but found strong support at the 20-period Simple Moving Average, aligned with the Middle of the Bollinger Bands. Contributing to this correction were positive US economic data and negative sentiment surrounding Germany's economic outlook and conditions. However, technical indicators such as the 50-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) all suggest a bullish outlook for EURUSD.
The analysis outlines potential upside and downside targets based on current market conditions, offering traders insights into possible price movements in the coming sessions.
Overview
Since June 26, the EURUSD exchange rate has shown an upward trend despite a few brief corrections. Last week's retracement was triggered by a bearish Evening Star candlestick pattern but found strong support at the 20-period Simple Moving Average, aligned with the Middle of the Bollinger Bands. Contributing to this correction were positive US economic data and negative sentiment surrounding Germany's economic outlook and conditions. However, technical indicators such as the 50-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) all suggest a bullish outlook for EURUSD.
The analysis outlines potential upside and downside targets based on current market conditions, offering traders insights into possible price movements in the coming sessions.
Key Economic Events
Tuesday 09:30 am (GMT+3) - Switzerland: CPI m/m (CHF)
Tuesday 17:00 (GMT+3) - USA: ISM Manufacturing PMI (USD)
Wednesday 04:30 am (GMT+3) - Australia: GDP q/q (AUD)
Wednesday 16:45 (GMT+3) - Canada: Overnight Rate (CAD)
Wednesday 17:00 (GMT+3) - USA: JOLTS Job Openings (USD)
Thursday 15:15 (GMT+3) - USA: ADP Nonfarm Employment Change (USD)
Thursday 15:30 (GMT+3) - USA: Unemployment Claims (USD)
Thursday 17:00 (GMT+3) - USA: ISM Services PMI (USD)
Thursday 17:00 (GMT+3) - USA: EIA Crude Oil Stocks Change (USD)
Friday 15:30 (GMT+3) - Canada: Employment Change (CAD)
Friday 15:30 (GMT+3) - USA: Nonfarm Payrolls (USD)
Friday 17:00 (GMT+3): Canada: Ivey PMI (CAD)
Technical Analysis
The EURUSD exchange rate has been trending upward since June 26, with a few brief corrections along the way. Last week, a brief decrease was triggered by a bearish Japanese candlestick pattern known as an Evening Star, but it found support at the 20-period Simple Moving Averare representing the Middle of the Bollinger Bands. The retracement was also influenced by positive US data and pessimistic expectations in Germany, the largest economy in Europe. The 50-period Exponential Moving Average (EMA), the Momentum oscillator, and the Relative Strength Index (RSI) all indicate a bullish bias for the EURUSD. Specifically, prices are above the EMA, the Momentum oscillator is registering values above the 100 baseline, and the RSI is above 50.
Potential Upside Targets
If the bulls keep control of the market, traders may consider the following four potential upside targets:
1.12008: The first price target is set at 1.12008, which corresponds to the year's highest exchange rate between the Euro and the US Dollar.
1.12559: The second price target is determined at 1.12599, representing the weekly resistance (R2) calculated using the standard Pivot Points method.
1.13101: The third resistance level is identified at 1.13101, corresponding to the weekly resistance (R3) calculated using the standard Pivot Points method.
1.14218: An additional resistance is established at 1.14218, representing the 423.6% Fibonacci Extension drawn from the swing high of 1.10089 down to the swing low of 1.08813.
Potential Downside Targets
If the bears manage to take control of the market, traders may find potential opportunities in the following four downside targets:
1.10089: The initial level of support is estimated at 1.10089, corresponding to the peak formed on August 5.
1.09286: The second level of support is established at 1.09286 representing the 50% retracement between 1.06659 and 1.12008.
1.08699: The third level of support is located at 1.08699, which corresponds to an internal trendline coinciding with the 61.8% Fibonacci Retracement level between the low of 1.06659 and the high of 1.12008.
1.07774: An additional downside target is expected to be 1.07774, corresponding to a daily low formed on August 1.
Fundamentals
The recent regional elections in eastern Germany have highlighted growing economic concerns, as Chancellor Olaf Scholz's ruling coalition suffered significant losses. The stagnant economy, marked by nearly zero growth over the past two years, has contributed to waning support for the coalition's parties, with voter frustration fueled by a lack of effective solutions to economic challenges. The anticipated economic rebound in 2024 has not materialized, with consumer spending failing to pick up and the industrial sector continuing to struggle. These economic difficulties, combined with rising concerns over migration, have driven voters towards populist parties, further eroding confidence in Scholz's government and potentially destabilizing the economic outlook.
Conclusion
In conclusion, the EURUSD has demonstrated a strong upward trend supported by key technical indicators despite occasional corrections influenced by economic factors. The market outlook remains bullish, with identified upside and downside targets providing potential opportunities for traders depending on market developments. With significant economic events on the horizon, market participants should stay vigilant for any shifts in sentiment that could influence the EURUSD's trajectory.