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EUR/USD analysis: nearing key 1.1620 resistance

Written By Fawad Razaqzada | 2018-08-07 08:38:07 GMT

The EUR/USD pair peaked at 1.1603 during the European session, now surpassing the level by a few pips ahead of Wall Street's opening. The broad run against the greenback is correlated to a stronger Yuan, a result of the PBoC´s efforts to contain the sliding currency, and the strong momentum in worldwide equities, boosted by solid earnings reports coming from European and American companies.

The Chinese currency has started rallying last Friday after the Chinese Central Bank increased its RRR for forwards purchases of foreign currencies to 20%, as the Yuan has been under pressure due to escalating trade tensions with the US.

In the data front, Germany released June Trade Balance, which posted a smaller-than-expected surplus of €19.3B, and the Industrial Production for the same month, which fell by more-than-expected, printing -0.9%. The bad news were ignored by market players. The US will release the JOLTS Jobs' openings for June and the IBD/TIPP Economic Optimistic Index for August, this last expected at 57.2 from the previous 56.4.

The pair retains its positive tone in the short-term, albeit the advance has been so far little relevant in terms of trend, as the pair remains below the daily descendant trend line broken last week, currently around 1.1620, also a strong static resistance level. In the 4 hours chart, the price has extended its advance above a still bearish 20 SMA, but remains below the larger ones, while technical indicators entered positive territory before losing upward strength. Seems unlikely that the rally can extend beyond the mentioned resistance but if it does, the next line of selling interest will appear in the 1.1650/60 price zone. The pair will resume its downward trend on a break below 1.1550.

Support levels: 1.1590 1.1550 1.1510  

Resistance levels: 1.1620 1.1655 1.1690

View Live chart for the EUR/USD

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By Fawad Razaqzada
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