EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(June 22 - June 26, 2020)
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EURUSD Technical Outlook:
We stay focused on the EURUSD weekly chart as some revealing patterns are shaping up there. For instance, the 1.1350 resistance held, and for a second week in a row, the bulls got rejected in their attempt to push higher.
EURUSD even closed below the 1.12 support area last week, although it now crossed above it again this Monday morning. Nonetheless, the 1.1350 resistance has now been fortified, and EURUSD bulls are unlikely to see an easy breakout higher. Above it, the 1.15 zone is the next resistance where the highs from March sit. Also worth noting is that this whole area between 1.1350 and 1.1500 could act as a wider resistance band that may push down on bullish attempts
anywhere in this area.
Turning to the downside, 1.10 remains the key support once/if the price moves below 1.12.
US Dollar Fundamental Outlook: USD Corrects Higher as Fears for a Second Wave of COVID-19 Stop Risk Rally
The consolidation and mixed trading in currencies extended last week with the USD ending it a tad stronger. Fears for a second wave of coronavirus kept a lid on risky assets as we observe the number of new COVID-19 cases is on the rise again, hence it’s no wonder that this environment has turned a little more supportive for the dollar.
Another factor that may be helping the USD is that US economic data is starting to turn more positive relative to the rest of the world. Retail sales surged by 17.7% in May, which completely makes up for the 16.4% drop in April. This week, the Fed will release bank stress test results while traders will be watching the durable goods, final GDP, personal spending, and the Core PCE price index on the calendar.
If the US economy proves more resilient than Europe and other regions, then the consolidation could turn into another bullish USD leg. Considering the fragile economic and political environment in the world, risk aversion may continue to linger in markets in one form or another for the foreseeable future. Such a scenario is likely to keep the USD in a favored position for a while longer.
Euro Fundamental Outlook: Waiting for a YES on €750 Recovery Fund
The EU summit last week didn’t produce any notable verification of the recovery fund proposal, and the euro currency extended the correction lower on profit-taking and risk-off flows. Fears of a second wave of COVID-19 are reversing the May and early June gains in risky assets, including the euro’s as well.
At the moment, for the euro it’s all about the recovery fund and if it will get wide approval in the EU. The market is looking for a positive answer from the frugal 4 states, and any sign of them giving the nod to the €750 billion package should support the euro higher. On the other hand, if the approval faces additional problems with little progress, then EUR is likely to retrace further lower.
Among other, the calendar this week features the Flash services and manufacturing PMIs from different EU countries and the German Ifo business climate index. But, due to the highly uncertain outlook, economic reports have a muted impact on markets, and instead, policy measures and risk flows remain predominant drivers. Traders are optimistic on the euro and the approval of the recovery fund, but if leaders disappoint, EUR will likely be in for a steep
decline.
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