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#1 28-05-2020 17:07:54

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 2831
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EUR/USD: the pair is at major resistance levels

EUR/USD: the pair is at major resistance levels


The hope of economic recovery, with encouraging signs from Asia, continues to be a countervailing force, given the risks of exacerbating diplomatic tensions between Washington and Beijing. As was the proposal for a 750 billion recovery plan and the US's serious health situation, which has just sadly surpassed the symbolic threshold of 100,000 virus deaths, according to data compiled by the Johns Hopkin University. On the forex, the eurodollar pair is stabilising, in a technically perilous situation at the top of the side channel (see chart).

The recovery plan proposed by the EC has brought its share of relief, by supporting the EUR in particular. IG France was keen to point out a potentially negative point ignored by the forex market: "ECB sources say that the ECB is preparing a contingency plan to continue its sovereign bond purchase programme, should the German Constitutional Court prevent the Bundesbank from participating. And that it would take legal action against the Bundesbank to force it back into the programme."

The EUR, the risky currency par excellence, must of course be worked with a keen eye on the development of the virus situation. While the statistics are rather encouraging in Germany, France, Italy and Spain, the United States and Latin America, led by Brazil, continue to worry. The death toll in the United States has exceeded the 100 000 mark, with over 1,650,000 total cases reported. Brazil, the second worst affected country in the world, has over 355,000 cases.

In this week's stats, the Richmond Fed's manufacturing index came out of negative territory without surprise, but up significantly to -26 (versus -54 last month), well above target.

As of Thursday, the eurodollar was trading at around $1.1068.

KEY CHART ELEMENTS

The eurodollar pair is in the upper range, a side channel that makes full technical sense, between 1.0785 and 1.1000$. The 100-day moving average (in orange) continues to take a negative direction, while still offering strong chart adversity. We will continue to coldly target the lower end of the range at $1.0785, a level that if broken, would unleash considerable selling energy.

MEDIUM-TERM FORECAST

In view of the above, our opinion is negative in the medium term on the eurodollar pair.

Our entry point is $1.1012. The price target for our bearish scenario is $1.0786. To preserve the capital employed, we advise you to position a protective stop at $1.1051.

The expected return on this forex strategy is 226 pips and the risk of loss is 39 pips.


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