According to market strategist Quek Ser Leang of UOB Grouphe EUR/USD could extend the ongoing bounce to the 1.0950 area on the near-term horizon.
From a high of 1.1275 in July, EUR/USD fell sharply and hit a low of 1.0447 in early October. After the pair bounced off the low, we highlighted in our chart of the day (Oct 31, pair at 1.0605) that EUR/USD weakness since early July had likely stabilized. We expected the EUR to trade in a range between 1.0315 and 1.0730. However, we indicated that as long as the pair did not clearly break above 1.0730, there was still a chance, although not very high, that it fell below 1.0400 before the risk of a more sustained and pronounced recovery became likely.”
Last week, EUR/USD rose as high as 1.0756. Two days ago (November 14), the pair suddenly took off and shot up to a high of 1.0887. Although this outsized rally appears to be getting ahead of itself, the weekly MACD is turning positive, suggesting there is room for it to rebound further. That said, we consider any advances as part of a ‘recovery phase’, and not the start of a new uptrend. Recovery phase has room to extend above 1.0945; chances of it rising above the next resistance of 1.1065 are lower. At this time, we do not expect the high of 1.1275 reached in July to be back in sight, at least in the coming months.
To continue recovering, EUR/USD must stay above the crucial support near 1.0700, the crossover level of the 21-day and 55-day exponential moving averages. Looking ahead, if the pair breaks below the 55-day exponential moving average, it would mean that it will likely trade in a range for a while.
Source: Fx Street
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