EUR/USD Forecast: Bulls may continue seeing the bright side
- The EUR/USD has ended its correction and is close to the highs once again after the sharp US dollar turnaround.
- US data, stock markets, set to determine the next moves.
- The technical picture looks quite bright for the pair.
The EUR/USD is trading just under 1.25 after surging to a daily high of 1.2510. The pair had already dropped to 1.2205 last week when the market mood was sour. The correction seemed on course to extend and turn into a deeper dive on Wednesday. US inflation data beat expectations and sent the dollar higher across the board.
However, markets experienced a sharp U-turn. a further digest of the data, a turnaround in stocks and a drop in the VIX, aka the "fear index" improved the mood and the dollar sold off. The euro, which enjoys positive economic indicators, was primed to take advantage of this dollar dive.
A few ECB members spoke earlier in the day but did not provide any earth-shattering news. Lautenschläger, Mersch, and Praet accompanied by data that came around expectations: the trade balance figures surprised to the upside on seasonally adjusted numbers but fell short of projections on non-adjusted data.
All in all, the stage is set for the stock market open and a few economic indicator from the US. The highlight of the economic calendar is the Producer Price Index (PPI) is set to rise by 2.5% on the headline and 2.1% on the core, YoY. After the robust reaction from consumer prices yesterday, we can expect the PPI to have a notable impact as well. Also, the US publishes the New York and Philadelphia manufacturing indices and the weekly jobless claims numbers.
Bullish technical picture for EUR/USD
The pair set a high low by marking 1.2205 as a bottom rather than the 1.2160 trough recorded early in the year. Moreover, the RSI on the daily chart is at high levels, but below oversold territory. In the broader picture, the pair is trending higher. Above 1.2536, 1.2620 and 1.2735 are lines that were seen in the past and could come into play.
It will be interesting to watch if the EUR/USD breaks above 1.2536, the highest level in three years. A failure to move higher will mark a lower high and serve as a bearish sign.
On the downside, 1.2340, which was the bottom line of the previous high range, works as significant support. It is followed by 1.2205, the recent low.
EUR/USD Forecast: nearing a multi-year high of 1.2536
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Author
Yohay Elam
FXStreet
Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.
