The sharpest moves in the currency markets came in the EUR/USD trading pair, which posted strong advancements on Monday at one point trading over 1.1740. Traders are preparing for the first estimate of the United States’ Q3 GDP, due out Tuesday. At the same time, actors in financial markets are euphoric about the prospects of the Euro saving the dollar from collapse. Speculators expect the EUR/USD pair is preparing for another test of the important 1.1800 resistance level. Look for this kind of action to take place in the short term.
This upward momentum for EUR/USD is further reinforced by technical indicators that are showing bullish divergence. The 20-period Simple Moving Average (SMA) currently holds above both the 100- and 200-period SMAs, suggesting a strong short-term trend. All three SMAs are moving to the upside, adding strength to the bullish bias for this currency pair.
As of writing, the 20 SMA is at 1.1726 acting as the closest dynamic support for day traders. This final level is incredibly important. If the EUR/USD does sell off, buyers will probably come to the rescue to protect the downside near 1.1670, which coincides with the shorter SMA. The positioning of these SMAs suggests that any retreat in price would be met with support, letting bulls stay in command.
The Momentum indicator is making an upwards trend and currently rests above its midline. At the same time, the RSI is at 65. That bodes well for further gains in the EUR/USD exchange rate. While it stays above the key 20 SMA, the near-term bias should still be positive.
Market analysts are calling the next data release on GDP the biggest potential market moving sentiment and trading strategy shift. The inescapable truth is that the US economy is still recovering from double-dip recessions of yesteryear. Any surprises in the GDP estimate would risk a greater degree of currency market volatility. Market participants will be closely watching how this key economic report impacts the dollar’s strength USDEUR.
As we dive into this week, the primary spotlight will be on inflation and labor-related economic indicators, and what they mean for the market landscape ahead. Most technical indicators point to a positive trajectory. This would likely induce further bullish sentiment among traders, particularly if the leading economic data points are favorable.