EUR/USD. Infusion remains bullish, but the 16th figure is still too tough

The euro-dollar pair conquers new price heights. Today traders were able to refresh the one and a half year high by testing the 16th figure. On the one hand, such price dynamics were predictable, given the positive results of the EU summit. On the other hand, impulsive growth to 22-month highs is alarming: now no one can say with certainty at what price level this impulse will fade away.

Nevertheless, certain conclusions can be drawn from the current situation. First, let's analyze the dynamics of the EUR/USD pair over the past month, that is, since June 21. To do this, go to the weekly chart (W1). As you can see, the pair has been demonstrating a pronounced upward trend over the past four weeks. At the same time, we see deep price pullbacks along with stable growth: the pair grows to a certain point, then pulls back and goes up again with renewed vigor. The wave-like dynamics change from week to week: if an almost 100-point pullback was recorded at the end of June, then last week the gap between the weekly high and the Friday closing level was only 15 points.

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This week, the EUR/USD pair went up almost without swinging, having renewed multi-month highs. The fundamental background, which we will talk about below, allows buyers of the pair to show character: the euro is in demand, while the dollar index continues to fall. The indicator dipped to 4-month lows, reflecting weak demand across the market. The greenback is losing its positions in almost all dollar pairs, and the euro-dollar pair is no exception.

But here it should be emphasized that the assault on the 16th piece ended in failure. The 1.1600 resistance level was a tough nut to crack. Apparently, many traders take profits and/or open sell positions in this price area, thereby putting pressure on the pair. Therefore, buying the pair looks risky at the moment.

We could observe a similar situation yesterday: the pair did not overcome the level of 1.1500 on the first try. Purchases also looked risky at the border of the 15th figure, as the risk of a downward correction increased with the deterioration of the upward momentum. But as soon as the bulls crossed the 1.1510 mark, the upward movement gained momentum again, as traders believed in further price growth and began to open long positions.

In other words, while EUR/USD traders are besieging the 16th figure, it is better to wait with purchases. This is a psychologically important mark, overcoming it will allow us to speak of approaching two-year highs: in this case, the strongest resistance level is 1.1730 - this is the lower border of the Kumo cloud of the Ichimoku indicator on the monthly chart (the highest timeframe is MN).

In general, the fundamental background contributes to the pair's growth. While the European currency enjoys the support of Brussels, the dollar is under the yoke of its own problems, which are primarily associated with the spread of the coronavirus. The United States still ranks first among all countries in the world in terms of the number of coronavirus infections and deaths. While the daily incidence in the world is gradually decreasing, this figure has begun to rise again in the United States. Earlier this week, the dollar tried to regain its position amid a sharp decline in the incidence - 45,000 infections were registered on Sunday, while the daily level did not fall below 60,000 last week. But such a decline was due to the "weekend effect": the daily growth was above the 60,000 mark during the first few days of the week. Florida has become a new epicenter for the spread of the epidemic in the country, while the number of cases is doubling every four days in Miami, in particular.

At the same time, US President Donald Trump, who previously linked the increase in the number of infected with the increase in the number of tests performed, unexpectedly urged Americans to "prepare for the worst times." According to him, the situation with COVID-19 in the country will initially "worsen significantly before it starts to improve." Such pessimism of the head of the White House has increased the concern of traders about the prospects for the American economy.

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In addition, the debate over a new package of assistance to the US economy continues in Washington: Republicans are drafting their one trillion dollar bill, while Democrats are pushing for their own law, which provides for the allocation of three trillion dollars. Uncertainty on this issue puts background pressure on the US currency.

Thus, at the moment it is better to take a wait-and-see attitude on the EUR/USD pair. Longs look risky - at least until buyers consolidate within the 16th figure. As soon as this happens (and the likelihood of this scenario being realized is quite high), you can consider buying at short distances - you can select the 1.1650 mark as the first target. The closest support level is 1.1470 (the middle line of the Bollinger Bands indicator on the H4 timeframe) - here you can place a stop loss.

The material has been provided by InstaForex Company - www.instaforex.com