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Jul 24 - 11:55 AM

EUR/USD - COMMENT-EUR/USD Rally May Briefly Become A Victim Of Its Own Success

By Randolph Donney  —  Jul 24 - 10:45 AM

EUR/USD's advance may get tripped up near-term because prices are overbought, very near their next upside objective at 1.1639 nL2N2EV0K4, and stocks, which EUR/USD has been positively correlated with, have taken a turn for the worse.

Indeed, amid strong European PMIs nL5N2EV215, EUR/USD has reached its highest levels since October 2018.
However, that’s probably not good for European exporters who are still dealing with reduced global demand due to the pandemic.
And though the EU relief plan agreed to this week was euro bullish, full passage and implementation may take a year.

Fortunately for the fairly sizeable EUR/USD spec longs, the U.S. is looking less attractive at the moment due to a number of factors including poorer management of the pandemic, some signs its recovery is losing steam nL2N2ET1KN, concerns about whether the next relief fund will be timely or large enough to bridge the demand gap, and the escalation of tensions with China.

In any event, if EUR/USD can't clear the 1.1639 Fibo objective off the June base, a 38.2% retracement of the 1.1348-1.1639 rise at 1.1459 may be enticing.
The March peak by 1.15 will also warrant a look for those seeking a second chance to buy the breakout.

Meanwhile, long-term charts show upside scope in the 1.18 vicinity.

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Source:
Refinitiv IFR Research/Market Commentary

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