EUR/USD Analysis: Relentless rally remains unabated, fresh 2-year tops and counting

  • EUR/USD attracted some dip-buying on Thursday amid the emergence of some fresh USD selling.
  • Growth concerns, fiscal impasse, a steep decline in the US bond yields weighed heavily on the buck.
  • The strong move up extended through the Asian session on Friday and pushed the pair to 1.1900.

The EUR/USD pair had some good two-way price moves on Thursday and was exclusively driven by the US dollar price dynamics. As investors looked past Wednesday's more dovish FOMC statement, the greenback witnessed some short-covering move and led to the pair's early fall to an intraday low level of the 1.1730 region. Thursday's release of weaker-than-expected German flash GDP print and consumer inflation figures failed to impress the euro bulls or provide any meaningful impetus to the major. In fact, the Eurozone's largest economy contracted by a record 10.1% during the second quarter of 2020. The early dip, however, turned out to be short-lived, instead caught some fresh amid a broad-based USD selloff.

Given that some earlier measures will expire this Friday, the impasse over the next round of the US fiscal stimulus and a steep decline in the US Treasury bond yields kept a lid on the attempted USD rebound. On the economic data front, the advance US GDP report showed that the economy collapsed by a record 32.9% annualized pace in the second quarter of 2020. The preliminary reading resurfaced doubts over the US economic recovery and prompted some aggressive selling around the USD during the second half of the trading action. The US President Donald Trump added to the USD bearish pressure after he floated the idea of delaying the Presidential elections, though the proposal was immediately rejected by Congress.

The pair rallied around 120 pips from lows and settled near the top end of its daily trading range. The momentum prolonged through the Asian session on Friday and assisted the pair to test the 1.1900 mark for the first time since May 2018. Market participants now look forward to the release of flash Eurozone CPI figures for some impetus. This along with second-tier US economic data might further contribute to produce meaningful trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the relentless rally assisted the pair to break through the 61.8% Fibonacci level of the 1.2555-1.0636 downfall and seemed rather unaffected by extremely overbought conditions. A lot of pessimism is already priced in the USD and traders might be inclined to take some profits off the table heading into the weekend.

That said, any meaningful pullback might still be seen as a buying opportunity and seems more likely to find decent support near the mentioned resistance breakpoint, around the 1.1820-15 region. A subsequent slide below the 1.1800 mark might lead to some additional weakness and drag the pair further towards the 1.1760-55 intermediate support en-route the overnight swing low, around the 1.1730 region.

On the flip side, the 1.1935-40 region seems to be the next relevant target for bulls, which is followed by the 1.1975-80 zone ahead of the key 1.2000 psychological mark.


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