EUR/USD has kicked off the week with a rally, putting shorts on the defensive given the potential for more than just short-term gains.
The euro's strength is being driven by several factors today.
The recovery in euro zone economic sentiment intensified in May nL8N2E629N, while German June inflation accelerated nL8N2E63QV.
These data points, along with upbeat risk sentiment driving flows out of safe-havens dollar and yen, have provided a broad-based bid for the euro.
EUR/JPY is back above 121.00 and EUR/GBP spiked up near 0.9170 both of which helped drive EUR/USD above its 10- and 21-day moving averages.
EUR/USD bears also face some troubling technical signs.
Since the March-June rally peak on June 10, EUR/USD has been trading within a bull flag pattern and also broke above short-term trendline resistance on June 22.
That trendline was tested from its topside on June 25 and held, which is typically a very bullish sign.
Should risk sentiment remain upbeat, a test of the flag top is likely, above which can imply the March-June rally is likely resuming.
In that event, June's high should be tested with potential for a run to 1.1570/1.1630 resistance.
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