EUR/USD Mid-Session Technical Analysis for July 23, 2020

The Euro is trading higher on Thursday, but holding inside yesterday’s range, which tends to indicate investor indecision and impending volatility. However, it often is the first pattern before a change in direction. I wrote “change in direction”, not change in trend.

The euphoria from the EU recovery fund deal could be wearing off, making traders reluctant to chase the Euro high, or itching to book profits after being handed a “gift”.

At 10:53 GMT, the EUR/USD is trading 1.1584, up 0.0014 or +0.12%.

EUR/USD traders are also watching the bond market closely. Euro Zone bond yields held near multi-month lows on Thursday, with demand for fixed income supported by U.S.-China tensions and hopes the bloc will bounce back quickly from the impact of COVID-19 given this week’s recovery fund deal.

The yield on Germany’s benchmark 10-year bonds, regarded as one of the safest assets in the world, was marginally higher in early trade as stock markets opened on a firmer tone.

The fact that traders are reacting to the escalating tensions between the two economic powerhouses suggests, while shrugging off the COVID-19 vaccine news from earlier in the week, suggests investors may be thinking about reducing risk exposure. This could send investors into the safety of the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1601 will reaffirm the uptrend.

The main trend changes to down on a move through the nearest main bottom at 1.1185. This is highly unlikely, however, due to the prolonged move up in terms of price and time, traders should start watching for a closing price reversal top.

The chart pattern won’t change the trend to down, but it could trigger the start of a 2 to 3 day correction.

Daily Swing Chart Technical Forecast

Based on the early price action, traders should watch the price action and read the order flow at 1.1570.

A sustained move over 1.1570 will indicate the presence of buyers. This could drive the EUR/USD into the October 16, 2018 main top at 1.1622. This is a potential trigger point for an acceleration to the upside.

A sustained move under 1.1570 will signal the presence of sellers. This could trigger a break into a pair of former tops at 1.1514 to 1.1496.

Side Notes

Taking out Wednesday’s high at 1.1601 then closing below 1.1570 will form a potentially bearish closing price reversal top.

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