Another week of pain for the euro bears, as bullish momentum continues to build once again for the EUR/USD, and from a technical perspective, a similar picture as for the GBP/USD on the daily chart. Indeed, it is interesting to note that this is one of the correlations that appears to have reconnected in the last few weeks, with the EUR/USD and the GBP/USD rising in tandem. Whilst many traditional relationships have broken completely, largely due to the distortion and bloated nature of the bond markets around the world, this at least appears to be one that is back in lockstep, although, given the volatile nature of the markets at present, this could be a transitory one. Nevertheless, it’s nice to see this old relationship back in place once more.
From a technical perspective, the key levels for the euro dollar are now firmly in place, with the red dotted line defining lower level support in the 1.2825 region, and the green line defining the secondary support level, created following the breach of resistance here on Tuesday, with the solid wide spread up candle, supported by above average volume. The rising volumes in the run up to this area are clearly evident on the daily chart, and provided these volumes continue to build we may even see the pair break beyond the 1.3500 region in the medium term. This will require additional effort from the bulls, given the relatively deep area of price congestion as delineated on the volume at price histogram. Not good news for the euro bears at present, and with the USD index now also looking bearish, and approaching some key levels of its own in the 80 area, then any move beyond here could signal further weakness for the US currency.
By Anna Coulling