EUR/USD Forecast: At A Two-week High And There May Be More In Store
- The EUR/USD has established itself above $1.2400, extending its gains and trading at the highest levels since February 19th.
- The momentum may peter out ahead of Draghi, but then continue higher.
- The technical picture is mostly bullish for the pair.
The EUR/USD is trading around $1.2420, after reaching a high of $1.2433 earlier in the day. The pair is underpinned by several factors:
Cohn resignation: White House Economic Advisor Gary Cohn announced he would step down. Cohn, a Goldman Sachs banker, has been a strong proponent of globalization and trade. He fell out with Trump and Commerce Secretary Wilbur Ross on the tariffs that Trump announced and the ensuing prospects of a trade war. The US Dollar dropped against its major peers.
Trump doubling down on tariffs: The President reiterated the need to fight trade wars in a joint press conference with the Swedish Prime Minister. Efforts by businesses and fellow Republicans to change tack have failed.
Korean breakthrough: North Korea will be willing to abandon its nuclear weapons if it gets guarantees for its regime. This groundbreaking news yesterday improved the atmosphere and sent the US Dollar and Japanese Yen lower. The fast pace of events has pushed the story closer to the backburner, but it also supports the EUR/USD.
Low expectations from Draghi: The ECB meets tomorrow to make its rate decision. No change is projected, and also the statement will probably remain unchanged. While the euro may be limited in its gains ahead of the event, it may resume its rises afterward. Draghi can only surprise with a hawkish statement. The risk is just to the upside. Full preview.
Later today we will get the US ADP Non-Farm Payrolls, a hint toward the official Non-Farm Payrolls on Friday. This event can be traded using the Market Impact tool. See more details here.
Nevertheless, sentiment about trade remains the primary driver for the pair today.
EUR/USD Technical Analysis - Looking bullish
After recapturing the uptrend support line in a heroic effort, the pair continues higher. The RSI is moving higher, gaining ground and indicating more gains. It is still far from overbought territory. While Momentum is still negative, it is not significant.
Resistance awaits at $1.2450, a line which supported the pair when it traded on higher ground. $1.2555 is the 3-year high and the next level to watch. Further above, $1.2650 is where the long-term downtrend resistance line from 2008 meets the chart.
Looking down, the $1.2360 capped the pair during February and supported it in January. It remains a strong support line. Further below, $1.2270 was the low point of the pair earlier this week, and $1.2205 was a trough in mid-February.
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