EUR/USD

EUR/USD Attempts to Close the Month on a Strong Note

EUR/USD is on pace to post a fourth straight month of gains. The pair has advanced 12% from its low in the middle of March. To provide some perspective, the measurement from high to low from all of 2019 measures 6%.

A weaker dollar has been one of the main drivers for the rally in EUR/USD since March. Prospects of low interest rates in the US, as well as a strong appetite for risk globally, has driven the greenback sharply lower.

Last week’s speech from Fed Chair Powell reinforced the concept that the US will keep rates low for an extended period. Powell indicated that the Fed will shift to an “inflation averaging” method which entails letting inflation overshoot above its 2% target.

Another driver for the currency pair had been the view that Europe has a better handle over the outbreak compared to the US. However, daily new cases have been rising in Europe during August while declining in the US.

Economic data that stands to impact EUR/USD this week is concentrated to the second half of the week. The highlight this week will likely be Friday’s US jobs report. Analysts are looking for the unemployment rate to decline for a fourth straight month but are expecting the number of new jobs in August to be slightly lower than the last report.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD traded in a narrow range for most of last week before breaking higher on Friday. The near-term momentum is to the upside and buyers are defending support at 1.1878 thus far.

While the weekly breakout is significant, the pair continues to trade in a broader range that has contained it for most of the month. Further, the 100-month moving average is in play. The indicator currently falls at 1.1870.

If EUR/USD is able to close August out above the moving average, it would signal a potential move above the August high of 1.1965. Perhaps to test resistance in the 1.2000 – 1.2035 area.

On a daily chart, EUR/USD shows some RSI divergence starting from the high in July. Bulls may want to be cautious playing rallies to the upside at this stage in the bullish cycle.

Bottom Line

  • EUR/USD remains firmly bid in early trading on Monday after breaking higher from a nearly week-long range on Friday.
  • The economic calendar is light today, although there could be some volatility in the currency markets as it is the last trading day of the Month.

For a look at all of today’s economic events, check out our economic calendar.