EUR/USD: A long-term bottom in place? – UOB
|Quek Ser Leang at UOB Group’s Global Economics & Markets Research noted EUR/USD could have charted a long-term bottom in the 1.0630 region.
Key Quotes
“As of the NY close on 04 Jun 2020, EUR/USD posted 8 consecutive days of ‘higher high, higher low and higher close’. Such uninterrupted and impulsive rally is rare. Back in late February to early March this year, EUR/USD exhibited similar strong uninterrupted gains over a period of 8 days. From what we can see, there is no other such price action over the past twenty years. The rally from late February culminated with a ‘blow-off top’ as EUR/USD nose-dived from 1.1496 to a low of 1.0635 within the span of a few weeks.”
“After the 1.0635 low, EUR/USD traded mostly sideways, albeit in a relatively choppy manner for close to 2 months. The current rally that started about two weeks ago is quickly approaching the weekly trend-line resistance at 1.1390. A break of this level would greatly increase the odds for EUR/USD to extend its gains above the March’s peak of 1.1496. Looking ahead, the next mid to long-term resistance level of note is at 1.1660. This level is a monthly trend-line and if EUR/USD were to break this resistance, it would more or less “confirm” that the March low of 1.0635 is a major long-term bottom. In other words, 1.0635 may not come back into the picture for the next several months, if not years.”
“The MACD on the monthly chart is also suggesting that 1.0635 could turn out to be a major long-term bottom. At the current level of 1.1340 in EUR/USD, the monthly MACD has crossed into positive territory. However, confirmation of a bullish crossover is only upon the monthly close at the end of June. In EUR/USD, crossover in the monthly MACD is infrequent and is a reliable signal for a long-term bottom or top The last instance when monthly MACD turned negative was close to 2 years ago in Aug 2018 when EUR/USD was trading at 1.1600 (see the left panel in the chart above). Since then, the decline in EUR/USD has not moved back above 1.1600. Overall, the probability of a longterm bottom at 1.0635 is high and only an unlikely move back below 1.0850 would indicate that EUR/USD is not ready to move higher in the coming months and years.”
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