technical analysis EURUSD

Technical analysis of EURUSD

The euro’s strong gains against the US dollar have continued this week ahead of the NFP. The common currency reached a high of more than two years earlier this morning GMT at $1.2139. Signs of progress toward new fiscal stimulus in the USA and the dollar’s general weakness have been key factors despite weak economic data affecting both currencies. This technical analysis of EURUSD looks at the four-hour chart.

There is no clear high resistance on this chart. $1.25 was the peak from January 2018, so this psychological area could be a barrier again over the next few months. To the downside, $1.20 is an obvious round number, while low support might occur around $1.175, the area of early November’s consolidation.

Technical indicators on EURUSD H4

 

Moving averages continue to give a very strong buy signal with all of the 50, 100 and 200 SMAs successively above slower lines and below the price. The 50 SMA has extended further above the 100 this week. Support from MAs comes initially from the value area between the 50 and 100 SMAs.

Overbought has been the name of the game for some time now, and this week has been no different. The slow stochastic (15, 5, 5) at 95 is very close to the maximum reading. All of the downward crossovers of the stochastic in overbought since November have been false signals. There is a weaker overbought signal from Bollinger Bands (50, 0, 2); Bands also suggest a larger range and higher volatility for the rest of December.

Price action and Fibonacci

 

The momentum and duration of the current uptrend for euro-dollar strongly suggests a fundamental movement that is also supported over shorter periods with liquidity-based buying. Two separate three soldiers upward have completed this week. The main question for many traders is how such positive signals from price action can be reconciled with overbought and fundamentals.

Price has now extended far above the 38.2% area from the weekly Fibonacci fan, This zone which coincides at the moment with the 100 SMA might be an important support if there’s a fairly deep retracement from recent highs.

Key data tomorrow: the NFP

 

Generally speaking, economic data have taken a backseat to sentiment this week so far for euro-dollar. November saw the first net contraction in the private sector in the eurozone for five months amid new lockdowns, while consumer prices continued to deflate for the fourth month in a row. Participants have discounted these data and continued buying the euro.

The consensus for Friday’s non-farm payrolls currently stands at 481,000 compared to last month’s 638,000. The rate of unemployment in the USA is expected to shrink negligibly to 6.8%. Whatever the actual results tomorrow at 13.30 GMT, traders should be prepared for high volatility affecting most financial markets.

Technical analysis of EURUSD: summary

 

The overall technical picture for euro-dollar remains very positive and more gains look likely sooner or later. However, obvious buying saturation and weak fundamentals for both currencies might cap gains in the immediate future, making a consolidation favourable. Tomorrow’s NFP is a critical release for this symbol’s direction into next week.

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