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EURUSD at resistance after two days of rally

Market Analysis
EURUSD Daily

EURUSD, Daily

German May retail sales rose 0.9% m/m, broadly in line with our forecast and a tad better than consensus expectations, while April was revised up to -0.3% m/m from -0.9% m/m. This left the annual rate at 2.3% y/y, down from 2.7% y/y in the previous month. Consumption remains the mainstay of the German recovery but while retail sales cover only part of overall consumption, the slowdown in the annual rate backs expectations for weaker growth in the second quarter of the year and while the Bundesbank expected a renewed acceleration in the second quarter, Brexit uncertainty will have put a spanner in the works.

EURUSD has rallied to a resistance area created by two lows that used to support the market. The 1.1098 low from May 30th and June 16th low at 1.1131 create a resistance zone that the market has been trying to work through yesterday and today. This resistance area coincides with 0.382 Fibonacci retracement level. The recent action is still part of the reaction against the huge drop lower in the pair. Therefore, what happens with GBPUSD is likely to impact EURUSD as well. While the resistance levels are near the next significant daily support level is at Friday 24th low. The 1.1237 resistance seems quite significant as it coincides with the 0.618 Fibonacci level. Price has moved inside the Bollinger Bands suggesting bullishness but the resistance ahead and the vulnerabilities related to GBP are a reason for concern and carefulness.

EURUSD 60

EURUSD 60 min

At the time of writing most of the USD pairs have been losing ground but then EURUSD found support from a rising channel at 1.1084 while Stochastics (7.3.3) is crossing higher from oversold levels. The 1.1084 level coincided with the lower Bollinger Bands and the 50 period SMA. The 15 min bullish pin bar in this context suggests buyers are ready to defend these levels. To get further confirmation we need to see price breaking near term resistances and keep on creating higher lows.  Otherwise the market breaking below the channel low increases.

 

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Janne Muta

Chief Market Analyst

HotForex

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