The Euro has been showing signs of weakness recently. But, with the Eurozone data quite strong, the weakening currency is expected to gain, despite continuing strength in the US Dollar and the Pound.
Among the EUR/USD currency pair, the Euro is expected to gain strength. The pandemic response in the eurozone being viewed positively favourably by financial markets.
Earlier, the Euro showed weakness and investors flocked to the US dollar as a safe haven. But Europe is showing more strength against the pandemic. Business is expected to come back to normality soon, faster than that in the United States which is struggling to manage infection rates and limit death toll.
EUR/USD Moving within a Small bandwidth
The euro on Friday was $1.12. The pair trading within a tight range. Despite good reports from the Eurozone, the euro has not been able to move higher.
Last week, the pair touched a low of 1.1185 on Wednesday and reached a high of 1,303 on Thursday. On Friday, EUR/USD closed at 1.1245. A move above the highs on Thursday and the lows of Wednesday will be closely watched by traders for this week.
A double-top formation has formed at levels of 1.1300. This signifies a downward move for the short term. Strong support at 1.1200 levels may be retested. A fall below 1.1220 will bring it to 1.1185. If the bears take over, the pair could be faced with steep fall from 1.1650.
The 200-day SMA at levels of 1.1040 is another support level to be watched.
However, a breach upwards of 1.1300 levels may push the EUR/USD currency pair towards targets of 1.1350. The next target is at 1.1417. On Friday, the EUR/USD pair was unable to surge past the 1.1300 pair and closed in the red. This has negated the upside on the currency pair.
The Covid-19 vaccine has brought some positive news on the market, bringing in a surge in currency levels on Thursday.
Jobs in the U.S. have increased to 4.8 million against the estimated 3.03 million. The unemployment rate has beaten estimates to 11.1 percent, showing good data, though wage growth continues to drag. However, EUR/USD continues to drift without much movement.
EU Data to Decide Trend
An EU summit to be held on 17-18th July will bring in a positive note in the market. The Brexit negotiations will also decide the breakout market trend for July.
The Eurozone faces awaits high impact data this week. Retail sales and consumer confidence data are important data which markets will keep a close eye on in order to see if the pandemic economic recovery is underway.
The trading range for the Sterling continues to range between 1.2070 and 1.2815 for the second quarter. The Brexit deal will continue to drive the currency and support or hinder sterling.
Weaker countries like Greece, Italy, Spain, and Portugal are looking for help from the EU government. Germany and France are facing recession fears with growth decreasing in these economies.
A coronavirus recovery package of €750 billion is expected to bring a new economic stimulus. German Chancellor Angela Merkel states that the fund may be approved by the European Union in July. However countries like Sweden, Denmark, Austria, and the Netherlands claim that taxpayers may be affected down the line. The package may bring support for the Euro if it gains approval.
EUR/GBP to Recover
The Euro opened this week at 0.9100 and touched a high of 0.9179 on 29 July. The EUR/GBP pair has been steadily moving downwards from this level. It is at crucial support levels of 0.9000. Investors who took profit on Monday saw some gains this week.
The economic outlook in the Eurozone is relatively strong and this may help the currency pair in its recovery.
The hospitality sector in England has opened up. Many businessmen have suffered from the close-down in recent times. The pound has been one of the poorest performing currencies in the G10 throughout June. The UK economy continues to show poor performance. The pound now awaits forward guidance from the Brexit discussions. If a trade deal does not materialize, the EUR/GBP pair will continue to move with a downward bias towards 0.92.
The Brexit uncertainty continues to cause jitters to investors. Both the EU and the United Kingdom have to compromise and bring in a mutually beneficial deal. Though talks have progressed very slowly, there remains optimistic tone in talks over the past few weeks. However, time is running out, as a deal has to be drawn in a few months. Talks of extension have been ruled out. If there is no progress in talks, both the EU and the UK will have a trade on WTO terms. Talks by top officials are closely watched by market investors.
EUR/JPY May Overcome Downtrend
The Euro was unable to break past 121.5 that it touched on 1 July. Fresh supply comes at these levels and the EUR/JPY pair loses steam every time it touches this level. Should it break down below 120.6, it may drift downwards to 120.3 in the short term.
The candle formation with an evening star on 3 June triggered a bull signal and the pair has been steadily on the increase after this.