EURUSD traders watching last weeks high and low for guidance

As US traders returned to their desks this morning, the dominant theme was US dollar weakness. The US Dollar Index, which had rallied to above 95.00 to approach its highest level in over 10 months last week, was hit by a bout of selling in Asian and early European trade to hit its lowest price in a week and a half in the mid-93.00s.

Over the weekend, political leaders from various G7 nations criticized and condemned the Trump administration’s decision to impose tariffs on the country’s allies, suggesting that the simmering global “trade war” could get worse before it gets better. Traders will be keeping a close eye on comments out of this weekend’s G7 summit to see whether the US will soften its stance, as well as any signs of escalation from other countries.

Meanwhile, the euro has caught a bid today after some decent unemployment data out of Spain, where the unemployment rate has dropped a full 10% over the last five years (from 27% to 17%). At the same time, the FX market remains optimistic ahead of the first EU ministerial meeting for the new Italian political leaders tomorrow. For now, traders believe that the populist government is willing and able to pursue its agenda within the current structure of the Eurozone, and given the stakes, Mr. Di Maio and company may be hesitant to “rock the boat” too much.

After shedding over 1,000 pips off its high in mid-February, EUR/USD bulls are finally trying to put a floor under the pair. As the chart below shows, the world’s most widely-traded currency pair briefly dipped to a 10-month low before seeing a strong bullish reversal last Wednesday. The pair has since broken its 6-week bearish trend line, potentially opening the door for a more meaningful rally this week.

Source: Forex.com, TradingView

That said, the greenback has staged a bit of a rally this afternoon, showing that dollar bulls (EUR/USD bears) are defending the previous-support-turned-resistance level around 1.1730. For now, the pair has yet to see a meaningful higher high & higher low form on a closing basis, leaving the short-term trend murky.

A close above the 1.1730 area in the next few days would open the door for a more substantial rally toward 1.19 or 1.20 in the days to come. Meanwhile, a close back below the December lows at 1.1550 would suggest that the medium-term downtrend has resumed and would likely expose 1.14 or lower next.

In other words, EUR/USD traders will be watching for a confirmed break of the high and low of last week’s wide-bodied candle to guide their decisions in the weeks to come.

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.