EUR/USD Mid-Session Technical Analysis for July 22, 2020

The Euro is trading higher against the U.S. Dollar as investor capital continues to pour into the single-currency after the European Union approved a 750 billion Euro post-pandemic recovery fund early Tuesday. Helping to boost the Euro were positive comments about the bloc’s sovereign ratings by agency S&P Global.

One of S&P’s top sovereign analysts, Frank Gill, said in a new report that the political consensus in establishing the Fund and endowing it with debt-raising capacity, was a major step forward for the EU and the 19-country Euro area in particular.

At 12:01 GMT, the EUR/USD is trading 1.1573, up 0.0050 or +0.44%.

“In that respect, the EU Recovery Fund is positive for European sovereign credit quality and for the institutional effectiveness of all member states, especially those in the Euro area.”

“The story is not over yet, but the establishment of a shared fiscal mechanism is a breakthrough for EU sovereign creditworthiness,” Gill said.

In other news, yields on high-grade Euro Zone government bonds edged lower on Wednesday, as concern over the global economy and rising COVID-19 cases in the United States curbed risk sentiment and scotched some of the euphoria from the European Union’s stimulus deal.

Despite the rally by the EUR/USD, some are warning that investors should remain on high alert until the pandemic is controlled.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed early Wednesday when buyers took out yesterday’s high.

A trade though 1.1185 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the EUR/USD is inside the window of time for a potentially bearish closing price reversal top.

Daily Swing Chart Technical Forecast

The current trade is being driven by momentum. Based on the early price action and the current price at 1.1573, the direction of the EUR/USD the rest of the session on Wednesday is likely to be determined by trader reaction to the January 10, 2019 main top at 1.1570.

Bullish Scenario

A sustained move over 1.1570 will indicate the buying is getting stronger. This could drive the EUR/USD into the October 16, 2018 main top at 1.1622. This level is a potential trigger point for an acceleration to the upside since the next major target is the September 24, 2018 main top at 1.1816.

Bearish Scenario

A failure to hold 1.1570 will indicate the return of sellers, or that the buying is weakening. This could create the momentum needed to challenge a pair of former main tops at 1.1514 and 1.1496. Since old tops tend to make new bottoms, buyers could step in on a test of these levels.

Side Notes

A close under 1.1522 will form a closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

For a look at all of today’s economic events, check out our economic calendar.