EUR/USD Technicals – Bullish Sentiment Stable Despite Slight Bearish Pullback

Yesterday’s analysis showed that EUR/USD is bullish, and perhaps the most bullish amongst major currency pairs, and prices did subsequently moved up higher after breaking S/T resistance 1.3715 conclusively. This gain is all the more impressive when we consider that market was bearish during early European session with DAX and FTSE 100 both trading in the red. Stock prices did recover later but it should be noted that EUR/USD were already trading higher during early European session, and the rally gained further traction during early US session when European bourses started to climb back into black.

Hourly Chart

However, this rally may have hit a temporary snag. Prices have tapered from Asian high of 1.3373 despite decent risk appetite during the Asian hours. With European and US Futures posting red right now, there is a risk of further bearish correction. This is not totally unexpected, as the EUR/USD rally wasn’t really supported by any fundamentals. In fact, fundamentals supports bearish correction. Latest German ZEW Survey has fallen from Jan’s 61.7 to 55.7 this month versus a 61.5 forecast.

Hence, S/T direction becomes a fight between strong bullish sentiment vs fundamental and risk flows that will drive EUR/USD lower, and unfortunately there is no telling whether EUR/USD will ultimately end up higher. That being said, we can still expect EUR to outperform other major currencies based on the inherent bullish strength (assuming that it’s still in play), and traders who may want to escape USD volatility or move away from risk trends may explore other EUR cross pairs for trading opportunities.

From a pure technical perspective, it is unlikely that prices will be able to retrace all the way to 1.3715 in the immediate future as Stochastic readings suggest that current pullback has already exhausted half the cycle. Hence, it will take extra effort to sink EUR/USD and given the strong inherent bullishness of EUR/USD right now that does not seem likely.

Daily Chart

Daily Chart shows the conclusive break of 1.37, which opens up 1.3815 as the next bullish target. A test of 1.3815 is certainly possible, but with Stochastic readings extremely overbought coupled with the lack of strong bullish fundamentals for long-term bullish gains, the likelihood of 1.3815 holding and slight bearish pullback becomes more likely. This doesn’t mean that prices will automatically fall back to 1.37 from there, as bullish sentiment may still keep prices up afloat long enough until fundamentals start to turn favourable. Hence, traders will definitely still need to wait for confirmations and that would be the frustration when sentiments/technicals do not really line up with the perceived fundamental direction.

More Links:
AUD/USD Technicals – Above 0.90 But Bearish Momentum Threatens Further Losses Ahead
GBP/USD – Steady as CPI Dips Below 2.0% Level
USD/CAD – Rangebound Trade Continues

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