The EUR/USD currency pair ended around the 1.48 region last week. Being a technically strong region, i mentioned that we may face certain resistance here. While we expect the US Dollar to further weaken due to various reasons, technicalities do exert influences at times.
Looking at the EURUSD chart above we note that the currency pair is still ranging tightly around the 1.48 line.
As mentioned, fundamentally the US Dollar has various reasons to continue to be bearish. For starters, the low interest rate of the US is probably fueling much of the carry trade. Low interest currencies such as the US Dollar are being sold for higher yielding currencies such as the Australian Dollar AUD.
From a technical point of view, the bullish currency pair faces a double challenge here. The upper trend line of the bullish channel from the beginning of the year and the 1.48 line. Furthermore various other indicators are showing signs of an overextended bullish run. Importantly, we are also at a 3 years low on the US Dollar Index.
Tomorrow brings the US ADP Non-Farm Employment Change and many investors are probably waiting out for this to get a clue for the upcoming US Non-Farm Payroll. Caution is to be exercised here as people are accustomed to positive news for a few months now and any nasty surprise will probably throw volatility right into the markets.
Trade Safely.
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