EUR/USD Bounces Back from 20-Day Low: Technical Analysis and Outlook
By ActionForex.com
Following a period of weakness that drove EUR/USD to its 20-day low, the currency pair is seeing a rebound supported by improved risk sentiment and technical buying. The latest recovery signals a possible shift in the short-term dynamics, although the broader trend remains somewhat fragile amid ongoing macroeconomic uncertainties and monetary policy considerations.
This article provides an in-depth technical analysis of EUR/USD, outlining recent price movements, key indicators, support and resistance levels, as well as the broader market context influencing this popular currency pair.
Recent Price Action
EUR/USD experienced selling pressure at the beginning of the current week, retreating to its lowest level in 20 days. However, the currency found footing near the 1.0660 area. Since then:
– The pair has recovered to trade above the 1.0700 handle.
– Bullish momentum appears to be building, fueled by a combination of technical retracement and improving market sentiment regarding the global economic outlook.
– The bounce reflects growing expectations that the Federal Reserve could pause its rate hikes, improving the dollar’s appeal in the short term.
Key Technical Levels
Analyzing EUR/USD from a daily chart perspective reveals crucial support and resistance zones, which traders should closely monitor for future price moves.
Support Levels:
– 1.0660: This level marks the recent 20-day low where price action found support. A decisive breakdown below this could open the door toward a deeper correction targeting the April low around 1.0600.
– 1.0630: Seen as the next potential area of buying interest, especially if the bearish momentum overrides the current bounce.
– 1.0600: Former support during April’s price action, this level would be key for defending the lower boundaries of the broader range.
Resistance Levels:
– 1.0720: Immediate resistance encountered during the current rebound. A sustained break above this would signal increased bullish control in the short term.
– 1.0770: The 55-day Exponential Moving Average (EMA) resides here, acting as a dynamic resistance level in recent weeks.
– 1.0800: A significant psychological level and previous reaction high. Moving above this could open the way to retesting the mid-May highs near 1.0890.
Indicators and Technical Metrics
Key technical indicators suggest that EUR/USD’s rebound may gain further traction in the short term, though broader momentum remains cautious.
– Relative Strength Index (RSI): Currently near the neutral 50 mark, suggesting a lack of strong directional conviction. A move above 60 would support the case for extended upside.
– Moving Averages: The 20-day EMA is gradually flattening but remains above the 55-day EMA. A bullish crossover could provide further confirmation of upward momentum.
– MACD (Moving Average Convergence Divergence): The histogram has started to print smaller negative bars, indicating a decreasing bearish bias with potential for a bullish crossover.
– Bollinger Bands: Price is currently moving back within the bands after touching the lower boundary, typically seen as a sign of technical correction.
Candlestick Patterns and Price Structure
The recent candlestick behavior confirms the presence of buying interest near the 1.0660 level.
– A bullish engulfing candle was observed on the daily chart, suggesting a potential short-term reversal.
– Follow-through price action is crucial to confirm a shift in momentum and validate the recovery.
– The pair has also managed to hold above the trendline support that extends from the March lows, preserving the medium-term upward structure despite recent weakness.
Fundamental Influences
While the technical landscape offers clues about potential price direction, fundamental drivers continue to make a strong impact on EUR/USD performance.
Federal Reserve Policy Outlook
– Markets are increasingly pricing in the possibility of the Fed holding rates steady in the near term, given a slowdown in inflation metrics and mixed labor data.
– Expectations of a pause or cut
Read more on EUR/USD trading.