Hello, dear traders!
Last week, the greenback continued strengthening against its main counterparts. The euro lost 0.87% against the US dollar over the last five trading days. This came due to several reasons. Firstly, investors were more optimistic about the pace of the US economic recovery from the pandemic. In addition, Jerome Powell took up a hawkish stance on monetary policy during his two-day testimony in Congress. Secondly, there is a spike in the daily infection rate in some European countries. In Germany, daily COVID-19 cases surpassed 20K by the end of the last week. Virologists suggest that this mark can rise up to 100K. In Poland, the infection rate is kept at around 35K per day. Meanwhile, France is ahead of all the EU in terms of new daily COVID-19 cases. Currently, there are approximately 4.5 million registered cases in the country. Experts believe that this is due to Europe's lack of vaccine jabs needed to develop collective immunity to COVID-19.
Speaking of the coronavirus situation in Germany, its highest court has stopped a law ratifying the EU's post-pandemic recovery fund. The decision came based on the fact that this legislation could be adopted only after all the details of the €750 billion package were revealed. Notably, similar legislations have been introduced in 16 out of 27 members of the EU. However, since Germany is Europe's economic locomotive, the recovery program will lose any sense if the country does not take part in the project. Anyway, it has not been German's final decision yet. It seems that the country is tired of dragging others along. Now, let us turn to technical analysis of EUR/USD and take a look at the weekly time frame.
Weekly chart
There have been some significant changes in the weekly chart. The EUR/USD pair broke a few important support levels. They are 1.1835 and 1.1800. Anyway, as I heve mentioned before, it is too difficult to define whether it is a true or false breakout based only on one candlestick that closes below or above a certain level, even if it is a weekly candlestick. Recently, the market has been volatile. Nevertheless, the chart indicates that the bearish trend is likely to extend. If so, the closest targets are seen at 1.1745 and 1.1700. If bulls want to regain control of the market, they should break the resistance levels of 1.1946 and 1.1990 and consolidate above the psychologically important mark of 1.2000. Geven a strong US dollar, this is highly unlikely to happen.
Daily chart
As for the daily chart, EUR/USD reversed to 1.1800 on Friday after a three-day fall. However, the quote failed to close above it at the end of the previous week. This does not mean the defeat of bulls. Most likely, they will try to return the pair above 1.1800. In such a case, you should look for points to enter short positions. You can consider entering short positions after EUR/USD is in the 1.1830-1.1870 price range. We will determine more specific entry points tomorrow after the analysis of lower time frames. If the price rises to the above mentioned price range, you should refrain from entering long positions because it is too risky to trade against the trend. You can also sell the pair from the 1.1800-1.1815 range if the price tries to return to 1.1800 and consolidates above it. In such a case, you should move a Stop Loss above 1.1873.
Have a nice trading day!
The material has been provided by InstaForex Company - www.instaforex.com