EUR/USD continues to march higher on the back of a weaker dollar and is seen making a clear break above a declining trendline that originates from the high posted earlier this month.
The demand for dollars has declined as US governments have stepped up their efforts to combat the Coronavirus. The equity markets rallied sharply on Tuesday as the US was on the verge of approving a $2 trillion stimulus package. Although equities have lost some momentum since then as the markets await for the package to be voted through the House of Representatives.
The correlation between the dollar and equity markets will be important later on today as the US releases it’s weekly unemployment claims.
Markets usually don’t tend to react much to this report although today’s report is expected to accompany an unusual amount of volatility. The majority of analysts are expecting a sharp rise in claims and there is a fairly large range in terms of analyst estimates.
While a negative figure typically would be bad for the dollar, the markets may show the opposite reaction today. Investors have shown strong demand for the greenback while selling in other markets such as equities whenever things relating to the Coronavirus tend to look bad.
EUR/USD has rallied above a declining trendline, which originates from the March 9 high, to set a bullish tone.
One thing to note about the current recovery rally is that it lacks upward momentum. This should be somewhat concerning for bulls.
Yesterday, The US Dollar index (DXY) broke down from a three-day range. Similarly, there has been a lack of momentum after the break lower in the dollar.
For the session ahead, resistance is found at 1.1000, followed by a further hurdle at 1.1074.
To the downside, there is some potential for a dip lower to test the recent breakout point around 1.0800.
- EUR/USD continues to extend higher as dollar demand fades.
- The US unemployment claims report is expected to jump higher today and a volatile response in the markets is expected.