Despite Euro and Pound Rebound, Key Resistance Levels Remain Hold (Medium Term)

Despite Euro and Pound Rebound, Key Resistance Levels Remain Hold (Medium Term)

EUR/USD climbed 0.5% to 1.1310 yesterday, as indicators suggest that Eurozone’s economic activity is quickly recovering from coronavirus crisis. Research firm Markit reported that the bloc's Manufacturing PMI climbed to 46.9 in June from 39.4 in May and Services PMI rose to 47.3 from 30.5, both stronger than expected. The Composite PMI jumped to the very best level in 4 months at 47.5.
EUR/USD climbed 0.5% to 1.1310 yesterday, as indicators suggest that Eurozone’s economic activity is quickly recovering from coronavirus crisis. Research firm Markit reported that the bloc's Manufacturing PMI climbed to 46.9 in June from 39.4 in May and Services PMI rose to 47.3 from 30.5, both stronger than expected. The Composite PMI jumped to the very best level in 4 months at 47.5.
In fact, EUR/USD has bounced roughly 5% from May's low. The pair reached a 3-year low after the action by the ecu financial institution to launch emergency purchase programme, on the other hand showed resilience whilst the ECB unrolled additional measures. Some investors are speculating that monetary easing is approaching an end and are already anticipating a reversal.

From a technical point of view, EUR/USD posted a rebound on a weekly chart, but the declining line drawn from June 2018 remains intact. The RSI is additionally capped by a declining line drawn from July 2017.
Currently, the pair is trading above both 20-week and 50-week moving averages. The RSI posted a bullish divergence signal, suggesting the loss of downward momentum for the costs .

As the technical configures are mixed, the technical outlook of EUR/USD would be neutral. As long because the overlapping resistance level at 1.1565 isn't surpassed, the pair could consider a consolidation move to 1.07250. Only an opportunity below this level would enhance the bearish outlook and trigger a drop to 1.0350 (the low of 2017).

On the opposite hand, only an opportunity above 1.1565 would suggest a transparent break of the declining line and would turn the outlook to bullish. subsequent resistance level would be located at 1.1900.


Similarly within the U.K., sentiment was lifted by upbeat economic data. The Markit U.K. Manufacturing PMI climbed to 50.1 in June, slightly above the critical 50 mark that separates expansion from contraction, and Services PMI rallied to 47.0 from 29.0 in May.
On a weekly chart, Although GBPUSD posted a pointy rebound from March low at 1.1410, it's still capped by a declining line drawn from December 2019.
Currently, the pair is trading around both 20-week and 50-week moving averages. The RSI is around its neutrality level at 50 and indicates a bullish divergence signal. Both indicators suggest the shortage of momentum for the pair.

In this case, as long because the overlapping resistance level at 1.2850 holds on the upside, the pair remains playing a variety trading and will consider a consolidation move to 1.1950. Only an opportunity below this level would bring a drop to March low at 1.1410.

Alternatively, a transparent break above 1.2850 would bring a re-visit to 1.3515 (the high of December 2019).

Published on: 6/24/20, 12:53 PM