EUR/USD is heading to upside
What happened?
The most traded pair has started the week on the positive footing. The overall market sentiment is more risk-on than risk-off right now. It’s more noticeable in the stock market. S&P 500 and Nasdaq have reached record highs. Reasons for this rally are quite obvious: vaccine hopes and the thaw in US-China relationships. The US administration reconsidered its recent bans on China and allowed US companies to make business with the Chinese app WeChat. This move encouraged investors ahead of the significant trade talks between two largest countries in the world. Moreover, Donald Trump considers fast tracking AstraZeneca vaccine from the UK. The FDA may approve it for emergency use in October. Of course, the current optimism may fade during the day, but the absence of important economic releases makes it less possible. The main event, which should impact EUR/USD is the Powell’s speech this week.
Yet another reason why EUR/USD keeps rallying is the weak US dollar. Most analysts agree that in the long run the greenback will continue waning, as it is overbought, and the further global recovery will weigh more on the safe-haven. However, in the short term the demand for the USD may rise amid the Covid-19 uncertainties, the Fed policy guidelines and the US politics.
Technical tips
The pair sharply fell down on Friday amid the worse-than-expected PMI report. Manufacturing PMI came out at 51.7 and Services PMI – 50.1, while analysts anticipated 52.7 and 54.6, respectively. Today EUR/USD has reversed and started recovering its Friday’s losses. It is approaching the key resistance of 1.1850, which it has touched a few times already. If it manages to cross it, the pair may surge to the Friday’s high of 1.1880. In the opposite scenario, the move below the key psychological mark of 1.1800 may push the price lower to the next support of 1.1770.
