EUR/USD analysis: correction could continue, trend change not yet certain
EUR/USD Current price: 1.1941
- EUR/USD corrective movement could extend up to 1.2050 price zone, a critical resistance area.
- EU growth and inflation data to be out these days to hint next ECB's move.
The American dollar remained under pressure on Friday, retreating for a second consecutive day from multi-month highs against most major rivals. The EUR/USD pair settled for the week at 1.1941, stalling its recovery at the 23.6% retracement of a 4-week slump, around 1.1960, an immediate resistance for this Monday. Dollar's retracement was triggered by soft US inflation data, which exacerbated profit-taking ahead of the event on Thursday. However, the fundamental background didn't change that much to justify a trend change in the pair, as the US Central Bank is still expected to provide at least two more rate hikes this year. Furthermore, sentiment has continued to improve on easing tensions with North Korea and China due to different issues, are headed into talks aimed to solve the issues. European macroeconomic figures released this past week, on the other hand, have confirmed that the strong economic growth has continued to decelerate at the beginning of the second quarter of the year, not too worrisome levels, but surely suggesting that the ECB will maintain the easing path. Still, dollar's correction could continue during the upcoming days.
This week, the macroeconomic calendar has little to offer in terms of first-tier data from these two economies, with the most relevant figures being GDP revisions in Germany and the EU, US Retail Sales, and the Union's April CPI.
From a technical point of view, the daily chart suggest that, if the mentioned 1.1960 Fibonacci level is conquered, the pair can continue advancing up to the 1.2050 price zone, the next Fibonacci resistance and where the pair has its 200 DMA, as indicators have recovered from extreme oversold readings, heading higher, however, below their midlines. in the same chart, the 20 DMA maintains a sharp bearish slope and is poised to cross below the mentioned 200 DMA, reinforcing the resistance area. The short-term picture, according to the 4 hours chart, confirms the longer term perspective, as the price develops below its 20 SMA, while technical indicators hold within positive territory, the Momentum advancing and the RSI consolidating around 57. In this last chart, the 100 SMA heads sharply lower, at around 1.2050, further making of the area a major resistance level.
Support levels: 1.1915 1.1880 1.1840
Resistance levels: 1.1960 1.2000 1.2045
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
