EUR/USD Drifting Under 1.13 Price Levels As German Industrial Output Dives Ahead of ECB’s Lagarde.
EUR/USD is trading presently under the 1.13 region, incorporating last week’s gains. US Non-Farm Payrolls overwhelmed with an increase of 2.5 million jobs and German industrial output dived by 17.9%, worse than foreseen. ECB President Lagarde testifies later in the day.
Technical Overview:
Wave Analysis:
Euro is currently bouncing off from the supportive trend line, while the price is held above the 52 simple moving average, I expect nothing but a possible momentum to the upper side, we are waiting for a clear sign that the corrective three wave cycle is ended so that we buy the next impulsive wave towards 1.13895. If the price breaks below the 52 periods moving average, then we expect further momentum much lower towards the 200 periods moving average but should not break lower. As it is now, we recommend looking for long term buy orders.
Trade recommendations:
Remain long with the previous buy position with your target at 1.13895.
Support & Resistance Analysis:
Euro/dollar exited overbought conditions the Relative Strength Index on the four-hour cart dropped below 70 allowing for further gains. Momentum remains to the upside and the world’s most popular currency pair continues trading above the 50, 100, and 200 Simple Moving Averages.
Resistance awaits at 1.1320, the daily high. Further up, 1.1365 was an initial peak, and it is followed by 1.1384, the highest since March. The next levels are 1.1410 and 1.1495.
Some support awaits at 1.1275. the daily low, and then by 1.1260, a temporary peak on the way up. The round 1.12 level served as a separator of ranges, and it is followed by 1.1150.
Fundamental Overview:
Austerity is dead and another reminder could send the euro higher once again. Christine Lagarde, President of the European Central Bank, is set to testify today and remind investors that both monetary and fiscal stimuli have been ramped up to the delight of bulls.
Last Thursday, the ECB announced it is adding €600 billion to its Pandemic Emergency Purchase Program (PEPP) its newest bond-buying scheme that has fewer limitations than previous ones. Moreover, the Frankfurt-based institution will reinvest the proceeds and maintain the scheme through at least June next year. The bank’s firepower lowers the government’s borrowing costs Italian yields collapsed in response and boost the economies.
Lagarde’s largesse came one day after Germany kicked off a €130 billion fiscal package, beating estimates and buying its conservative expenditure stance. The move by Europe’s largest country serves as an example to others.
While the eurozone’s one-two punch remains modest in comparison to America’s multi-trillion action, it is a significant shift.
Lagarde’s testimony before the European Parliament will likely include calls for governments to do more to speed up the recovery from the crisis. The continent continues its gradual reopening with cases and deaths from coronavirus extending their decline.
In America, investors continue digesting the surprisingly strong Non-Farm Payrolls figures — the US gained over 2.5 million jobs, a positive shock in comparison to expectations for a loss of millions of positions. The Unemployment Rate dropped to 13.3% with many low-earners returning to work or at least receiving ample government support to keep them attached to employers.
The NFP data allowed the dollar a much-needed correction as it lessens the need for further monetary stimulus from the Federal Reserve, which announces its decision this week.
It may also slow lawmakers’ gradual grind toward another fiscal stimulus package. Democrats want expenditure worth around $3 trillion while Republicans aim to settle for $1 trillion or less. Talks continue on Capitol Hill.
On the other hand, ongoing protests against racial discrimination may convince elected officials to move faster. Massive peaceful demonstrations were seen across the US, nearly two weeks after the killing of George Floyd, an unarmed black man, at the hands of the police. The events have yet to impact markets, but if they accelerate government spending, it would weigh on the safe-haven dollar.
Overall, Lagarde stands out on an otherwise quiet day, yet markets will likely ponder on developments from the recent past and future.
Source: FXStreet & Forexnews.pro. Create Your Trading Account!
Originally published at https://www.egmanalytics.com on June 8, 2020.
