Indeed, the EUR/USD currency cross has continued upward, looking to retest the high for the year at 1.1830. The pair is still fairly bullish and showing good momentum. They’ve repeatedly established higher highs and higher lows over the past few sessions. For the EUR/USD it’s now a second straight week of upward movement. It rose as high as 1.1730 before closing above the psychologically significant 1.1700 mark.
As bullish as the current sentiment is, analysts caution that it rests on technical indicators and the most recent economic data. The pair’s advance gets solid momentum from the decisively bullish 20 Simple Moving Average (SMA). It has been a consistent provider of firm support this entire rally. As market participants watch these developments with keen interest, the potential for more headroom continues to increase.
Technical Indicators Favor Bullish Outlook
Although the recent short-term outlook for the EUR/USD pair has been bearish, the long-term outlook is bullish. A confluence of technical readings on the weekly chart bolsters this bullish case. The 20 SMA flattens and provides support at around 1.1630. For now, the longer moving averages remain bullishly sloped beneath the shorter one.
The Momentum indicator has crossed its midline into positive territory almost vertically, bolstering the bullish narrative. Moreover, the RSI has begun to rise again and now sits around 56. This string of positive momentum may mean that a bullish breakout is closer than we think.
The daily chart indicates that EUR/USD is at the higher end of its recent range. Such positioning implies a potentially bullish extension in the cards. Market participants are confident about the pair’s potential to overcome and break above the year’s high.
Economic Indicators Impacting Market Sentiment
In reality, a perfect storm of recent economic data and other factors has combined to paint this misleading picture. That’s because in June, industrial production in the Eurozone fell by 1.3%. That’s a larger drop than anticipated, and it’s a step back from the 1.1% increase seen in May. That kind of data can profoundly affect expectations about the economic strength of the Eurozone and help explain moves in the EUR/USD.
US economic indicators have painted quite the opposite picture. Today, the core annual US Producer Price Index (PPI) came in at 3.1%. This is up from the prior 2.9% rate and above the expected 3%. Plus, PPI jumped 3.3% year-over-year in July, far more than June’s 2.4% and above the consensus estimate for 2.5%.
These dichotomous statistics might inflame investor emotions toward each fiat currency. Investors will be watching intently for clues to prospective monetary policy moves from the European Central Bank (ECB) and the Federal Reserve (Fed). Stay tuned as the Fed deliberates on interest rates in its remaining public meetings this year. This can all lead to increased uncertainty and volatility in the currency pair.
Market Predictions and Future Trajectories
Analysts are becoming increasingly bullish on the EUR/USD’s outlook. They see it potentially re-approaching its annual high at 1.1830 and additional advances could take it back up toward 1.1900 and even the 1.1960 area. We know that market conditions can change in a heartbeat. Should the pair fail to stay above 1.1630 support zone, it would likely see a decline toward at least its weekly bottom at 1.1590.
If this recent downward trend continues, we stand to lose even more. This might drive it down to the formidable hard support at 1.1470. Traders will be on the lookout for reversal signals. They will be seeking validation of a persistent bullish trend if indeed that continues as they steer through these choppy waters.