Similar to yesterday, EUR/USD is showing upward momentum in the early day but the pair has been range bound for most of the month and this type of price action may continue in the week ahead.
One of the driving themes for EUR/USD last month was that Europe had a better handle on the Coronavirus outbreak compared to the US. Since then, cases have started to rise in Europe while declining in the United States.
Another development since last month is that the dollar’s inverse correlation with the equity markets appears to be weakening. Since mid-March, the dollar has been firmly offered while equities pushed higher.
Since last week, the downside momentum in the dollar has faded while the stock markets continue to show strength. The S&P 500 rallied to close at a fresh record high yesterday, and has advanced about 0.4% in the pre-market, shortly after the European open.
GDP growth in Germany during the previous quarter was revised up to show a decline of 9.7% from the initial estimate of a 10.1% contraction. Despite the slight improvement, the contraction remains significant. To provide a comparison, the GDP contraction inspired by the financial crises in the first quarter of 2019 was 4.7%. Later in the week, the US will release revised GDP figures for the second quarter.
EUR/USD has traded sideways since the start of the month. As it is the last week of the month, a break from this range appears unlikely, especially considering the light economic calendar.
Resistance for the pair over the near-term is found at 1.1850. The same level held EUR/USD lower yesterday. Beyond that, further resistance is seen at 1.1900.
To the downside, the 1.1735 price point has offered support to the range that has been playing out in the month thus far.
Several of the major currency pairs are trading at important technical areas. This highlights the potential for a broader decline. Although a break below 1.1735 will probably be needed to encourage bears.
- EUR/USD remains range bound and appears poised to hold this pattern into the end of the month.
- The 1.1850 price point has been acting as resistance in the early week.
For a look at all of today’s economic events, check out our economic calendar.