EUR USD Weekly Technical and Fundamental Analysis |
After starting the week under pressure the EUR USD rebounded as trader appetite for risk grew following favorable economic reports from the U.S. and China. The news that U.S. retail sales fell less than expected lifted the spirits of traders who were expecting a sharp decline. Rather than buy the Dollar in expectation of a weaker economy, traders shifted their interest to the short side as the report drove up interest in equities and other risky assets.
The news that Chinese inflation and manufacturing were better than expected also sat well with traders who were expecting to see bearish news on the heels of speculation that China was getting ready to burst its economic bubble.
Fear that China’s economy was coming to a screeching halt has been one of the reasons traders have been using to prop up the U.S. Dollar. In addition, the shedding of risky assets has also driven traders into the safety of the Greenback.
Although the Euro was supported on Tuesday, the single currency didn’t start the week well as demand softened following the news that the S&P credit rating service cut Greece’s sovereign debt rating to CCC from B. Traders sold the EUR USD as the news hit the market, but they soon realized that the hawkish view from the European Central Bank and the potential for another interest rate hike in July are the main reasons to support the Euro at this time.
On Tuesday 17 members of the Euro Zone met to discuss further aid for Greece. Although no agreement was reached, it did keep the issue of sovereign debt problems on traders’ minds. This may have limited some of this week’s gains.
Technically, the EUR USD main trend remains up on the weekly chart. The short-term range is 1.4940 to 1.3969. The mid-point of this range at 1.4454 is currently being tested. Regaining this price level will be a sign of strength especially since it will correspond with a breakout above a downtrending Gann angle at 1.4460. Bearish traders may try to defend this resistance cluster at 1.4454 to 1.4460, but if buying momentum can overcome this zone, then expectations are for an acceleration into the Fibonacci or 61.8% retracement level at 1.4569.
Originally posted here.
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