EUR/USD – Overbought Condition Grows, 1.1600 Cap to Hold

The Euro continued its impressive rally against the US Dollar hitting an 18-month high at 1.16014 before retreating to 1.1570 in late New York. The reversal of the risk-on trend triggered by an escalation in US-Chinese tensions lifted the Greenback against all its rivals. The USD/CNH (US Dollar-Offshore Chinese Yuan) rose to 7.017 from 6.974 overnight.

EURUSD - ForexLiveCharts UK - H1 - 23 July 2020
EURUSD – ForexLiveCharts UK – H1 – 23 July 2020

ECB President Christine Lagarde said that while the proportion of grants and loans in the EU’s massive fiscal package are reasonable, “the balance could have been better but it’s an ambitious package”, reported Reuters. Lagarde also reiterated that the economic recovery was uneven and uncertain. Tomorrow sees the release of Euro area and Eurozone Manufacturing PMI’s, all of which are expected to show improvements.

We have highlighted in the past few weeks that speculative Euro long bets are at two-year highs. For a healthy uptrend to develop we need to see some of those longs corrected. EUR/USD has immediate resistance at 1.1590 followed by 1.1620. Immediate support lies at 1.1530 and 1.1500. The 1.1600 cap should hold and see a corrective move south ensue. Look to sell rallies.

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