The EURUSD has been posting impressive gains over the last week, with the huge miss in US employment last Friday provoking the next leg higher in the pair above the 1.1900 level.
The recent good run for the euro provides a start contrast to the currency’s performance prior to the Jackson Hole economic symposium and the recent strong of soft US macroeconomic data points.
For me, the big question is just how long the EURUSD pair can ride on the coat tails of positive risk sentiment, due to the fact that the FED are likely to keep printing huge amounts of money as the job’s situation is worsening,
A huge and overlooked aspect of the current move higher is the fact that we could have a meltdown in US stocks anytime, which could potentially spoil the party for EURUSD bulls and cause a big retracement.
Asian markets could soon be reeling from weakening Chinese data, and the market pays huge attention to the economic health of the world’s second largest economy, let alone the fact that the American economy is spluttering all over the place.
While I am bullish on the EURUSD pair medium-term we should be mindful that a big risk-off could sink the EURUSD pair back under the 1.1800 level. Personally, I would be a buyer close to the 1.1700 level as I think a market meltdown could be brutal, but ultimately short lived.
Sentiment towards the EURUSD pair has started to turn negative, hence why more immediate gains could follow. The ActivTrader Market Sentiment tool shows that some 69 percent of traders are bearish towards the EURUSD.
Last week some 55 percent traders were bearish towards the pair. Now that traders are turning bearish, while the EURUSD pair rises, I suspect we will see more short-term upside.
EURUSD Short-Term Technical Analysis
The EURUSD pair is extremely overbought on the lower time frames and does appear ripe for a technical correction at any time, and this is currently making me nervous in the near-term.
A large amount of MACD price divergence has also formed down towards the 1.1740 region, with the Relative Strength Indicator is vastly overbought around current trading levels.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, I can still see a massive amount of bullish MACD price divergence has built until the 1.2000 resistance level, meaning this divergence will probably be reversed soon
We should expect to see a test towards the 1.1930 level if bulls start to close the daily candle above the 1.1900 level. Overall, I am expecting more upside coming over the next few weeks but do be mindful of a potential long squeeze down towards the 1.1700 region one final time.