Currency Pair of the Week: EUR/USD
Joe Perry June 29, 2020 11:08 PM
Given the events in Europe and the US this week, EUR/USD could see some volatility.
With the onslaught of economic data, combined with continued negotiations in Brexit talks, EUR/USD has potential for some volatility this week. There also continues to be fears of increased coronavirus cases, along with additional fiscal and monetary stimulus from both sides of the Atlantic.
June 30th brings month-end, quarter-end, and the half year mark. And along with that brings the usual month end data, the biggest of which will be US Non-Farm Payrolls which have been moved to Thursday this week because of the US Independence Day holiday on Friday. Expectations for June are for +3,074,000 new jobs added to the economy vs +2,509,500 in May. These may seem like extremely large numbers, however, recall that the US lost over -20,000,000 in April! The data could have volatile implications for the US Dollar
The UK and the EU are set to meet again to discuss Brexit. Boris Johnson has said that he wants a deal in place by the end of July, although some are saying it will not happen until mid-October. Johnson has threatened to walk away from the table soon if there is no progress, which would affect both the Euro and the Pound.
Fears are rising along with the increased number of coronavirus cases in the US and Europe. Arizona, Florida, and Texas are the main US states with large spikes in the number of cases. In Europe, Germany has seen a few hotspots, however not nearly as many as in the US. Fed Governor Powell and Treasury Secretary Mnuchin testify before the House Financial Services Committee on Tuesday to address the stimulus for the US economic because of the coronavirus. The Trump administration is also considering a new $1 trillion stimulus package. In addition, Germany has voted in its lower house to cut the value-added tax (VAT) from 19% to 16%. The upper house will vote on the VAT later Monday, in addition to additional payment stimulus of 300 Euros per child.
Technically on a daily timeframe, EUR/USD has bounced off the April 24th lows to the 161.8% extension level from the March 30th highs to the April 24th lows near 1.1406. The pair is now consolidating in a pennant formation. If EUR/USD breaks out of the pennant formation above 1.1300, the target would be above the March 9th highs (1.1492) near 1.1700.
Source: Tradingview, City Index
On a 240-timeframe, EUR/USD has pulled back to the 38.2% retracement level from the May 14th low to the June 10th highs near 1.1173. The pair then bounced to the top of the downward sloping channel near 1.1420. The 38.2% retracement level now acts as the first level of support. Below there is the bottom trendline of the channel and the 50% retracement level near 1.1097. First resistance is the top of the channel trendline near 1.1300 and then the previous highs at 1.1420.
Source: Tradingview, City Index
Given the economic data and the macro events in Europe and the US this week, in addition to the technical setup, EUR/USD could see some volatility this week. Watch for headline spikes and make sure to have proper risk/reward in place.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.