Key Points:
- The Italian referendum’s fallout seems to have passed.
- MACD bias is shifting to bullish.
- Fundamentals likely to be key in pushing the pair above the 1.08 handle.
Now that some of the dust has settled in the wake of the Italian referendum, it has become clear that the EUR could be in better shape than was initially thought. Specifically, we could be about to see some of the recent losses recouped by the pair which could see the EUR back as high as the 1.09 handle in the medium-term.
First and foremost, whilst the prior session’s breakout may bode well for the EUR bulls out there, they may have to wait a touch longer before the full extent of the upswing materialises. More precisely, the EUR/USD will likely need to cool off somewhat in the coming days, potentially retreating back to the old upside constraint of the channel which the pair only so recently freed itself from. However, the EUR should find it difficult to sink below this trend line as the 100 period EMA will be exerting some dynamic support.
As it is unlikely to be closing back below the old upside constraint, it is expected that the EUR will reverse once again and track higher. This move would be in line with the MACD bias which has just experienced a bullish crossover on both the daily and H4 timeframes. Additionally, as the pair begins this second attempt at pushing higher, the EMA bias should become fully bullish. Presently, the EMA’s have only managed to have a partial crossover which could explain why the pair ran out of steam when challenging the 32.8% Fibonacci level.
Once the EUR has moved to challenge this key resistance level a second time, it will largely be down to the fundamentals to push the pair across the line. In the absence of some strong results, there is a chance that, instead of seeing a second surge and subsequent rally back to the 50.0% Fibonacci level, the pair moves into an ascending triangle pattern. This pattern would take a significantly longer period of time to resolve itself which could leave the EUR bulls unfulfilled until the New Year.
Ultimately, the EUR is beginning to see some sentiment return as the Trump effect begins to wane to a certain extent. As a result, a boost to the pair seems fairly inevitable, especially now that the results of the Italian referendum seem to have had a less disruptive effect than forecasted. As discussed above, the pair’s technical bias also seems to be coming around which could exacerbate any bullishness stemming from the fundamentals as well. All things considered, we could finally have a trend reversal shaping up and the pair should be watched closely as a result.