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This currency pair has been able to attract upside price action over the past few days and sustain some capability of buying power. Retail traders however will have to balance their perspectives on considerations that financial institutions while appearing to believe the EUR/USD had been oversold previously, seem to be now confronted by notions that headwinds will be generated. Cautious sentiment still pervades the broad global marketplace, and this could create risk averse dynamics that deliver choppy terrain for speculators, which they might find technical opportunities within.
EUR/USD Finds Support but Upside Remains Limited
While the EUR/USD certainly has provided evidence that lower realms seen in the middle of last week were too low, the ability to confront higher realms and continue climbing is not likely to remain a strong temptation quite yet. Retail traders should understand that financial institutions may start to become comfortable with the notion of equilibrium being found as they try to decipher their mid-term outlooks.
Inflation concerns remain tangible and the notion that some central banks will try to confront higher energy costs with increased interest rates is regrettable. The EUR/USD faces further tests from persistently strong USD centric notions if global equity indices continue to face selling. Risk averse attitudes may create a price realm for EUR/USD technical traders in which they can test momentum shifts if they are nimble enough.
Equity-Market Weakness Supports Dollar Demand
Stability in some measures has been delivered the past few days as the EUR/USD has traversed above the 1.12100 realms quite consistently since last Thursday. As of this moment the currency pair is around 1.12190. A momentary high on Friday did see the 1.12700 vicinity become a temptation, but strong selling then developed and a low around 1.12130 was seen. This selloff happened as Wall Street became combustible with stronger selling in equities, which highlights the ability of risk averse sentiment to cause flights to safety – meaning stronger USD centric attitudes.
The question which could cause further bursts of power in the broad Forex market and the EUR/USD is where broad market sentiment will develop into in the short and near-term. If the EUR/USD is able to sustain the 1.12150 to 1.12200 realms early today, and large players later in the day remain tranquil the price realm of the currency pair will likely see a test of its known range. However, the strong surge upwards seen on Friday after the 1.12300 level was penetrated may be hard to reproduce until equity markets show stability.
The Rebound Faces a Fragile Market Backdrop
The oversold narrative in the EUR/USD remains a storyline. From a one month technical perspective the currency pair remains within lower terrain that looks attractive if a speculator has the ability to be patient and search for higher terrain. Problematically, timeframes are vulnerable to shifting concerns in financial institutions which continue to see higher energy costs remain a factor – WTI Crude Oil is above $97.00 and worries persists in equity markets that investors remain skeptical about the mid-term. This could create headwinds in the meantime for the EUR/USD that create the ability to look for reversals near-term. Technical traders who feel they can wager on momentum and not be caught by volatility may want to pursue the EUR/USD, but dangers clearly exists for those with limited funds.
EUR/USD Price Chart
Friday’s Reversal Keeps Downside Risk in View
The ability of Friday’s trading to produce a sincere surge higher will likely be considered a signal by some technical speculators that large players believe the EUR/USD will increase in value. However, the swift reaction lower after Friday’s highs challenged upwards marks last seen on the 6th of October could prove to be wishful thinking if equity markets do not recover from the stark selling which developed going into the weekend. Traders need to remain agile and open to changing perspectives over the near term.
Risk Sentiment Will Shape EUR/USD’s Next Move
Speculatively the short and near-term are likely to continue offering a wide array of sentiment being driven by an investment marketplace that lacks clarity for those wanting to pursue the EUR/USD. Geopolitical concerns are likely to also be a factor as a long list of dynamic storylines confront investment confidence, and thus outlook concerning short-term notions which will create more volatility for the EUR/USD.
EUR/USD Short-Term Outlook
EUR/USD is holding near 1.12190 after finding repeated support above the 1.12150-1.12200 area. A sustained move above 1.12230 could bring 1.12360 into focus, although renewed pressure in equity markets may limit upside follow-through. On the downside, a break below 1.12160 would weaken the recent recovery and expose the 1.11980 area. The pair’s response around these levels may reveal whether buyers can maintain control while risk sentiment remains unsettled.
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