EUR/USD Forecast: Looking to break free of the wedge on Independence Day
- The EUR/USD is not going anywhere fast on America's Independence Day.
- Trade war concerns are relatively muted and EZ PMI's were mixed.
- The pair is trading in a narrowing wedge.
The EUR/USD is trading in the mid 1.1600s, not very different from levels seen in previous days. After Germany's political crisis has ended, the focus returned to trade wars. China blocked the activities of Micron, an American company, in what could be seen as a low-level hit back at the US. On the other hand, the Chinese Yuan's fall has stabilized, a sign that the world's second-largest economy does not seek to escalate the confrontation.
Markets have been relatively calm and this allowed the pair to stabilize. Another stabilizing factor is the American Independence Day. US markets closed early on July 3rd and are fully closed on July 4th. Lower liquidity means that if we do get a significant development, volatility could be elevated.
However, the big moves will likely wait for Thursday's top-tier US releases. The ADP Non-Farm Payrolls and the ISM Non-Manufacturing PMI serve as hints towards the jobs report on Friday. In addition, the FOMC Meeting Minutes may reveal the members' thoughts on the trade and other topics.
See: ADP + ISM Non-Manufacturing PMI Preview: last minute hints could raise expectations for Friday's NFP
In the meantime, euro-zone final Services PMI's came slightly above expectations on average, with the euro-zone final measure being upgraded from 55 to 55.2 points, mostly driven by Germany.
EUR/USD Technical Analysis
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The lower thick black line shows that the EUR/USD is experiencing higher lows which amount to uptrend support. The second line shows that the pair is capped by downtrend resistance, which began beforehand.
The textbook says that when the pair chooses a direction, the move will be quite substantial. Where will it go? Other indicators are neutral. The Relative Strength Index is around 50 and Momentum is nowhere to be seen. The pair also trades between the 50 and 200 Simple Moving Averages on this four-hour chart.
Support awaits at 1.1615 which held the pair from falling on June 29th. The next support line is 1.1590, a low point back on July 2nd. Further below, 1.1540 is the last cushion before 1.1508, the low point in 2018.
On the topside, 1.1695 capped the pair on July 2nd. More significant resistance is at 1.1720, the peak on June 26th. Far above, the June 14th swing high of 1.1850 looms.
More: Trade War from the Trenches: everything you need to know about the 3 big battles ahead
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.
