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The euro currency is on course for more gains against the US dollar this week, after April preliminary PMI manufacturing data from the eurozone came in much better-than-expected, lifting the EURUSD to its highest trading level since March 3rd.
Last week technical indicators across various time frames flashed buy signals. The daily and weekly Parabolic SAR indicator, which is a key trending indicator turned bullish. A series of bullish price patterns are also pointing to a coming rally towards the 1.2300 resistance level.
This week EURUSD traders are likely to react to the FOMC interest rate decision and the growth data from the United States. It is also noteworthy that Core PCE, which is the FED’s preferred measure of inflation, is being released this week.
Looking at retail sentiment, negative sentiment has increased to 78 percent now, which means that only a small majority of retail traders are bullish right now This is creating the perfect conditions for a further short squeeze. And this has been evident already this morning.
It may be prudent to mention why the EURUSD pair is actually rallying. The US dollar is falling across the board because traders and investors believe that the ongoing money printing the FED is unlikely to stop and the Biden administration is going to continue spending.
Some we need to keep in mind that eurozone growth is weak, so traders may be anticipating the fact that the US in going to continue to outpace the eurozone in this regard, and that the euro will underperform. This is currently not the case, so we should go with the mantra that the trend is our friend for now.
Watch out for further losses in the EURUSD pair while sentiment remains this bearish, and the technical also remain bullish. More of the same from the FED this week will likely confirm the next leg higher in the euro.
EURUSD Short-Term Technical Analysis
Bears had their chance last week as the EURUSD pulled back from the 1.2080 level, however, bulls shiftily bought the pullback, meaning a strong bid-tone is in force in the short-term horizon.
The four-hour time frame shows that an inverted head and shoulders pattern continues to play, and is pointing to a coming rally towards the 1.2300 resistance level at a minimum.
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Traders should also be aware that a much large bullish reversal pattern will form if the EURUSD pair reaches the currently yearly high, which is just below the 1.2350 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time chart, the technical are resoundingly bullish, with the RSI, MACD, and Parabolic SAR indicator all flashing big buy signals right now.
Furthermore, the weekly and monthly Parabolic SAR indicator is bullish, which means that the medium-term uptrend still has room to run higher.
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