Bottom line: EURUSD long term structure remains bullish until prices stay above 1.0636 mark. The engulfing bullish candlestick pattern still holds as EURUSD consolidates with a trading range. A break above 1.1020 should be seen as constructive for bulls.
Fundamental Outlook:
EURUSD had come under pressure last week and has dropped below the 1.0800 mark before seeing some buying around 1.0765. The Euro zone could be facing an economic contraction by over 7% in 2020, due to COVID-19 pandemic. The EURO would be taking cues from GDP Growth Rate figures to be out this week (Friday).
FTSE had rallied last week by around 3% along with other global indices. Today, as we write the article the indice is up 1.5% trading around 5969 mark. The indices might be pinning hopes over post lock down as economies re-open in the US and Europe. Also, the easing US-China trade war fears might be reason behind the optimism. As IMF forecasts an inevitable drop (-3%) in Global GDP figures in 2020, it remains to be seen how long the rally could continue.
GBPUSD may find an uptick this week as the UK begins to re-open. UK Prime Minister Boris Johnson had laid out steps towards easing the lock down yesterday allowing manufacturing and construction work to resume. As economies re-open (US, UK and European Countries) Crude Oil demand is expected to surge again sending prices higher going forward.
Technical Analysis:
EURUSD has been trading within a potential triangle consolidation since printing lows at 1.0636 mark in March 2020. An engulfing bullish candlestick pattern had appeared and is still holding well. EURUSD might favour a bullish breakout going forward, as long as 1.0636 low remain intact.
Structurally, EURUSD has found support around the fibonacci 0.786 retracement of its earlier rally between 1.0340 and 1.2555 levels during the period Jan 2017 to Feb 2018 respectively. A bullish reversal is expected and break above 1.1500 resistance would confirm.
Most traders might be willing to hold long positions with protective stops just below the 1.0636 mark and projected targets above 1.1500 in the coming weeks. Only a break below 1.0636 would void the above bullish structure.
Prepared by
Harsh Japee, Technical Analyst.
EURUSD Chart
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