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The euro currency has staged a much-needed range breakout against the US dollar this morning, with the EURUSD pair cracking the 1.2200 level, marking the pair’s highest trading level in over four-weeks.
Now that the range breakout has taken place the stage looks to be set for further upside in the EURUSD pair towards the 1.2300 level, and possibly the current yearly high, around the 1.2350 region, over the coming days and weeks.
It is worth mentioning that the US dollar is falling across the board, despite rising US bond yields, and particularly the 10-year yield, advancing sharply today. This breaks from the recent dynamic of the US dollar and US bond yields rising in tandem.
Without a doubt, improving risk sentiment within financial markets is propelling riskier currencies higher at the moment. The euro currency, although not a complete proxy for risk-on, say in the way that the Australia dollar can be, does benefit from a risk-on trading environment.
The rapid appreciation of the euro currency against the greenback is not isolated. The US dollar is extending its downtrend against the British pound, New Zealand dollar, Australian dollar, and Canadian dollar.
However, the slide in safe-have currencies against the buck is also spilling over into the euro crosses. The EURCHF and EURJPY pairs have seen rapid and almost non-stop appreciation this week.
The ECB may be concerned about the sharp appreciation against the mentioned currencies and may try to jawbone the single currency lower during the next policy meeting. The eurozone needs the euro currency to be competitive. But in the meantime, there is little to stop the rise of the euro given the current market mood.
Looking at retail sentiment there is a large one-way skew towards the EURUSD pair right now. Which could imply that the ongoing breakout has legs. The ActivTrader Market Sentiment tool shows that some 74 percent of traders are bearish towards the euro right now as it breaks to a one-month high.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that a breakout from a large, inverted head and shoulders pattern is currently underway, with the target of the bullish price pattern is located close to the 1.2400 resistance level.
Additionally, the recent range break has let the EURUSD pair clear all forms of meaningful resistance. This means that the EURUSD pair could have a free reign higher until the 1.2300 price zone.
Source By ActivTrader.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart shows that the EURUSD pair has broken free from the Ichimoku cloud and looks set to challenge towards the highs of the year so far.
A move towards the 1.2350 level would invalidate a large head and shoulders pattern. If the pattern is invalidated then we should expect the EURUSD pair to set about on a journey north towards the 1.2700 to 1.2800 area over the medium-term.
Source By ActivTrader.
