Hi dear colleagues!
In this article about the most popular currency pair, let me shift focus towards the US dollar. The thing is that lately the US currency has been trading erratically. It is common knowledge for savvy traders that the US dollar is the most significant currency on a global scale. First, it is traditionally considered the world's key reserve currency as well as a safe-haven asset. Second, the US dollar is the national currency of the top global economy. Even though China's economy has been booming like mad, the American economy still remains number one, at least nowadays. Third, prices of gold, crude oil, and stock indices are denominated in the US currency. Importantly, national central banks in many countries are scaling down the greenback in their foreign currency reserves. They are poised to convert the US dollar into the euro.
Nevertheless, neither the euro nor the pound sterling nor the yuan can compete with the US dollar in terms of demand among global investors and the greenback's share in international transactions. I guess the reason is not the US dollar itself which is being printed actively by the Federal Reserve. It is the economic constituent that accounts for the dollar's reign. For comparison, China's economy heavily depends on imported commodities and exported consumer goods. When it comes to the EU economy, the EU consisting of 27 member countries has to deal with a challenge when they should come to the common denominator about legislation or make a serious decision. All countries inside the euro block differ greatly in terms of economic development. In fact, Germany is fairly termed the powerhouse of the EU economy. Indeed, the most advanced country bears the brunt of financial burden. Unless its contribution to the EU welfare, the euro zone would have collapsed long ago as the region with the single European currency in circulation. In other words, if the euro had been cancelled, European countries would have retrieved their national currencies such as Deutsch Mark, Italian lira, or Belgian franc.
Why is the US dollar extending weakness across the board under the current economic conditions? It is difficult to explain in a couple of words. Obviously, the US economy is outpacing others in its economic recovery from the COVID-19 fallout. At the same time, the US dollar served as the main safe-haven asset at the peak of the pandemic. Unfortunately, new coronavirus strains have popped up now and then. So, there is a long way until the battle with COVID-19 is won for sure.
Let me remind you that the technical picture is the factor of prime importance to make a crucial impact on a dynamic of any currency pair. As you remember, many analysts predicted that EUR/USD could face serious resistance of the sellers at 1.1994 - 1.2030 and would hardly overcome this zone. However, the market actually behaved in a different way. In the daily chart, we can clearly see a retracement to 1.1950. In fact, EUR/USD found strong support at that level as well as at 50-MA, 89-EMA, and the red Tenkan line. As a result, the pair climbed from lows of 1.1942 and 1.2036 and closed with gains on Monday.Interestingly, at the moment of writing this article, EUR/USD was trading at near 1.2065, heading upwards. The currency pair entered the Ishimoku cloud with confidence that means a further move towards the upper border at 1.2092, exactly below another key level of 1.2100. This the distant upward target for EUR/USD in case the price fixes above 1.2030. It is still uncertain how the pair will close today and whether it will be able to fix above 1.2030 and 61.8 fibo correction from a decline to 1.2042 - 1.1703.
It would be better to search for market entry points on the 1-hour chart. As you see, I applied Fibonacci grid to the area of 1.1942 – 1.2079. In the Asian session today, the pair pulled back to resistance of 1.2047 broken yesterday and 23.6 fibo. Afterwards, the pair seemed to be poised to resume the upward move. However, EUR/USD faced strong resistance at near 1.2080 and came under selling pressure. Now a lot will depend whether the level of 1.2050 will be able to withstand the second attack of the bears.
Judging by the current price action, this support will be tested for the second time. If reversal candlestick signals appear above 1.1950 in this or a 1-hour chart, it would be a good idea to plan long positions with targets at 1.2075 – 1.2100. I also admit a fake breakout or a breach of 1.2050. If this prediction comes true, EUR/USD could find solid support at about 1.2030 and reverse upwards from this level. All in all, the preferable trading idea now is buying the pair. Technically, it makes sense to open long positions from the strong area of 1.2050 – 1.2030.
Trade at a profit!