EUR/USD made a significant bullish technical break after crossing above the 1.10 handle last week and is holding above the important technical area at the start of the week.
After grinding lower in a downtrend since early 2018, EUR/USD is showing signs of making a bottom, or at least an interim one. The pair broke higher from a major confluence of resistance last week as the dollar fell under pressure.
The pair might have a slow start to the week as some of the US markets are closed today in observance of Columbus Day. This could trigger unusual volatility in the session ahead. Volatility is likely to pick up on Thursday as inflation data will be released from the Euro area and retail sales figures from the US.
The exchange rate has not had much of an impact on news late last week that China and the US have reached a partial trade deal. The news has brought the return of risk appetite with equity markets rallying around the world. A notable advance was seen in the German DAX on Friday as it rallied to fresh two-month highs and broke above a declining trend line which originates from the July peak.
EUR/USD rallied for a second consecutive week and broke above an area of resistance that includes three important technical indicators. First is the 1.1000 psychological handle which has generally been respected as of late. Second is a declining trend channel which has contained price action since late June.
Lastly, the pair has broken above its 20-day moving average. This particular indicator has been crossed a few times since August. However, none of the prior attempts resulted in a sustained break. In this context, the indicator is an important area to watch in assessing bearish reversal potential. The moving average currently resides at 1.0983.
The rally on Friday was blocked by horizontal resistance at 1.1059. This level remains a hurdle in the near-term. The 50-day moving average is near the level to create a bit of a confluence.
Support for the session ahead comes in around 1.1010 as a rising trend line is in play. This trend line originates from the low printed at the start of the month.
Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.