EUR/USD Bull Flag in Play as Covid-19 Case Numbers Taper

EUR/USD, European Central Financial institution, ZEW Financial Sentiment Index – Speaking Factors:

• The US Greenback clawed again misplaced floor towards its main counterparts as traders mull the prospects of further fiscal stimulus out of the US.
• Optimistic financial knowledge out of Germany could underpin the growth-sensitive Euro.
• EUR/USD Bull Flag sample at key resistance suggests additional upside is within the offing.

Asia-Pacific Recap

The US Greenback clawed again misplaced floor towards its main counterparts throughout Asia-Pacific commerce, exacerbating the New Zealand Greenback’s declines after the RBNZ expanded its Massive-Scale Asset Buy (LSAP) program.

Gold and silver continued their respective slides as bond yields continued to trek larger. The haven-associated Japanese Yen held comparatively regular while the risk-sensitive Australian Greenback fell again in the direction of the 0.71 degree.

Wanting forward, UK GDP knowledge could show market transferring forward of the US CPI launch for July.

Market knowledge chart created utilizing TradingView

Optimistic Investor Confidence Could Underpin Euro

Germany’s ZEW financial sentiment index jumped to its highest degree in over 16 years this month, suggesting that the European powerhouse could get better from coronavirus-imposed restrictions sooner than initially anticipated.

This knowledge builds on a 27.9% soar in German manufacturing unit orders and an 8.9% rise in industrial manufacturing within the month of June. Each releases beat market expectations handily and could possibly be reflective of brighter instances forward for the native economic system.

Nonetheless, European Central Financial institution Chief Economist Philip Lane believes that “whereas there was some rebound in financial exercise, the extent of financial slack stays terribly excessive and the outlook extremely unsure”.

DailyFX Financial Calendar

Due to this fact, Lane cautions that “it could be unwise to attract sturdy conclusions from the second quarter outturn [and] when analysing the prospects for the third quarter, the containment of the virus stays crucial issue”.

With that in thoughts, climbing Covid-19 case numbers could weigh on the Euro and regional danger belongings.

With Germany reclassifying the Spanish capital, Madrid, and the encircling Basque area as high-risk journey areas, resulting from rising an infection charges.

Additional reclassifications and restrictive measures may considerably bitter market sentiment and would in all probability result in a interval of great danger aversion. Finally hampering the efficiency of the growth-sensitive Euro.

European Day by day Covid-19 Instances (YTD)

Supply – European Centre for Illness Prevention and Management

EUR/USD Day by day Chart – Bull Flag or Break-Down?

From a technical perspective, EUR/USD charges proceed to consolidate above key psychological assist on the 1.17 degree. Carving out a possible Bull Flag sample as value oscillates between assist and resistance on the month-to-month excessive (1.1916).

Nonetheless, a break of assist could possibly be within the offing ought to the MACD indicator’s bearish crossover incite additional promoting strain.

The RSI additionally hints at a possible draw back break, because the oscillator retreats from overbought territory and begins to check the uptrend extending from the yearly extremes.

Nonetheless, ought to assist on the 1.17 degree stay intact, a continuation of the first uptrend could seemingly eventuate.

With a day by day shut above the August excessive (1.1916) wanted to validate the bullish continuation sample, and open a path for value to check the 2017 excessive weekly shut (1.2035).

EUR/USD day by day chart created utilizing TradingView

EUR/USD 2-Hour Chart – Divergence Hints at Topside Push

Zooming right into a two-hour chart highlights the potential for a rebound in EUR/USD charges, because the RSI fails to observe value to decrease lows.

Assist on the 200-period transferring common (1.1703) seems to be offering a supportive base for value and will direct EUR/USD larger because the MACD indicator eyes a cross again above its ‘slower’ sign line counterpart.

With that in thoughts, a push to check the 50-MA (1.1773) could seemingly eventuate within the close to time period, with a break above the psychologically imposing 1.18 degree opening a path for value to check the month-to-month excessive (1.1916)

EUR/USD 2-hour chart created utilizing TradingView

— Written by Daniel Moss, Analyst for DailyFX

Observe me on Twitter @DanielGMoss