EUR/USD – Sun Shines in Europe, Bull’s Confidence Lifting; Correction?

The Euro outperformed FX, extending its gains for the 9th straight day as bullish sentiment continued to build for the shared currency, particularly in contrast with the US Dollar. EUR/USD jumped to hit a peak not seen since March 2018 at 1.1627. EUR/USD dipped back just under the 1.1600 level to 1.1595 at the New York close. The sun is shining brightly on Europe and the Eurozone following their agreement on a robust stimulus package which showed solidarity among the Continent’s leaders. Europe has also been able to contain the coronavirus spread better than the US, Latin and South America, Africa, and some areas of Asia. While that is the case, the Covid-19 pandemic is still very much alive and until a proven vaccine is discovered and ready to distribute, it is difficult to become overconfident. The latest Coronavirus World Odometer shows that Spain saw a spike in new cases above 2,600.

EURUSD Oanda-DailyFX 1H Chart – 24 July 2020

The shared currency has risen from 1.1200-1.1600 without a decent correction in 9 straight days. Speculative market positioning is at long Euro bets at their largest since 2018. And the bullish calls for the shared currency are getting bolder and bolder with 1.20 being touted. While that may be the case in the medium term, specially if the US Dollar continues to slide, we need to be wary of a short -term correction which may be around the corner. The catalyst could come from anywhere but today sees the release of Euro area and Eurozone Manufacturing and Services PMI’s, all expected to show improvements. Anything less than forecast could see the bulls start to trim their long Euro bets.

EUR/USD has immediate resistance at 1.1600 and 1.1630. Immediate support lies at 1.1560 followed by 1.1520 and 1.1470. Look to sell rallies within a likely range today of 1.1480-1.1620.

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