The EUR/USD currency pair persists in its bullish trajectory, demonstrating strength after the recent market volatility. Since mid-May, the pair posted higher highs and higher lows on a daily basis showing an overall bullish sentiment. Currently on Monday, EUR/USD is maintaining a strong position above the 1.1400 level, trading at 1.1415. This follows on from Friday’s brief decline to 1.1370, after strong US Nonfarm Payroll numbers sent the dollar higher.
Positive momentum comes from three main areas. The Euro’s relative strength and the investors’ moderate risk appetite are paving way for more upside. Today, we have no major economic data to contend with. The market is looking ahead to the EU Sentix Investors’ Confidence Index, as it could provide further direction for the Euro.
EUR/USD Technical Outlook
EUR/USD technical conditions underscore a bullish path since mid-May. Above, the pair formed a series of higher highs and higher lows, affirming the current upward trend. As of writing, it is comfortably above 1.1400, supported by a bit of dip-buying on Monday.
On Friday, EUR/USD was under pressure as it fell to a week low of 1.1370 but immediately bounced back. The trading level is now at 1.1415, a clear indication that bulls are still leading the way. They could run into headwinds at the June 3 high of 1.1455. If the price manages to break above this point, traders will probably begin focusing on the round number of 1.1500 as the next psychological barrier.
To anyone following the duo too closely, there are cause for optimism. A break below this important support level at 1.1400 may signal a bearish reversal. A drop under the June 6 bottom at 1.1371 could motivate sellers and spark a much deeper correction lower in price. Now that we’ve established what these levels are, market participants should look towards these key levels as they hone their day trading strategies.
Economic Influences on EUR/USD
The EUR/USD currency pair is more than just a technical analysis play. It is just as much dictated by economic fundamentals.
The Euro
The Euro is the official currency used by 19 of the 27 countries that make up the Eurozone. It benefits from relatively high interest rates compared to other currencies. This interest rate differential regularly lures income-seekers into investment, boosting demand for the Euro.
The US Dollar had a surprising and massive rally across the board on Friday. This spike came on the back of some unexpectedly positive Nonfarm Payroll (NFP) data. The US Nonfarm Payrolls report in May showed an increase of 139,000 jobs, just above market expectations of 130,000. That surprised dispatch was a short-lived boon for the Dollar. Its effect is wearing off as the tide of market sentiment turns again toward a risk-on attitude.
Furthermore, uncertainty from the latest round of US-China trade talks has made for a mixed bag market. Investors are cautiously optimistic as they await developments from these discussions, which can have significant implications for global economic growth and currency valuations.
Market Sentiment and Future Outlook
Traders are waiting to move into a new week with bullish sentiment. The prevailing market sentiment, characterized by a moderate risk appetite, is ahead of fresh rounds of US-China trade talks. This optimism has kept EUR/USD above some key support levels and gave it enough upward bullish momentum as well.
The Eurozone Sentix Investors’ Confidence Index is the only major release slated for today, making for a fairly quiet economic calendar. This index gives us a pretty good glimpse at the mood and confidence of investors throughout the Eurozone. As such, it has the capacity to reverse future trading activity in the currency pair.