EUR/USD – Outperformance Continues, Overbought Condition Builds

The Euro led FX higher against the already soggy Greenback as more strategists saw the EU economy outpacing that of the US. Europe already leads in halting the spread of its coronavirus outbreak, although a second wave of new infections (particularly in Spain) are starting to concern. The shared currency has gained almost 5% against the US Dollar since the start of the month. Bullish Euro sentiment continues to build as does the speculative market’s long positions in the shared currency. Overnight the EUR/USD pair hit its highest since September 2018 at 1.17813 before easing to close at 1.1757 in New York.

EURUSD 5 Year Chart - FXCM Daily FX - 28 July 2020
EURUSD 5 Year Chart – FXCM Daily FX – 28 July 2020

There are signs we may see short term exhaustion of the Euro’s climb. Overnight the yield gap between the US and German 10-year Bunds widened. Germany’s 10-year rate fell 5 basis points to -0.50% while its 10-year US counterpart climbed 3 basis points to 0.62%. In the futures market, speculative long Euro bets have climbed to their largest total since April 2018.
EUR/USD has immediate resistance at 1.1780 followed by 1.1810. Immediate support can be found at 1.1710 followed by 1.1680 and 1.1650. Look for an exhaustive move up to test between 1.1780 and 1.1800 before a corrective retreat to 1.1680 first. Likely range today 1.1680 – 1.1780. Look to sell rallies.

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