For the fifth day in a row, the EUR/USD pair is moving in an upward correction range, which reached the 1.1881 resistance before settling around 1.1870 at the beginning of the trading session on Tuesday. Amid this positive performance, the pair will face potential volatility in mid-week trading when the Federal Reserve Board releases the minutes of its last meeting in July, and at the end of the week, the Eurozone PMIs will be released. The single European currency began to correct higher since March 20, when the market collapse due to the Coronavirus finally ended, and the dollar began to lose its strength as investors, with their increased confidence, began to shift once again to riskier assets. Meanwhile, the shift towards the Eurozone as a destination for higher returns in the post-COVID-19 world has been a particularly supportive pillar of the EUR/USD rally.
However, the EUR/USD advance appears to have diminished by moving towards the 1.19 level, and analysts have since been asking if a more stable bounce is likely. In fact, last week we wrote that several prominent analysts have been studying this idea. However, as it moves through the middle of the month, the dollar appears to be losing momentum and, as a result, the EUR/USD appears to be more positive.
In this regard, Richard Berry, an analyst at Hantec Markets, said: “The threatening dollar rally lost its way in recent sessions and the positive bias began to take root once again in the EUR/USD pair”. And added: “With containment of the EUR/USD tests of the main support at 1.1695, bulls now aggregate three consecutive positive candles. Momentum indicators have eased the threatening corrective slide and are now looking to restore the positive formation again.” Francesco Bisol, forex analyst at ING Bank NV, said: "After a week of consolidation, we believe the EUR/USD pair can return to test highs." On the EUR side, the highlight of this week will be Friday's release of the Eurozone PMIs.
The Eurozone PMI data will be released at 09:00 GMT on Friday, and given that the relative economic performance is an increasingly important factor in the performance of the currency market, it must be taken into account. The Eurozone manufacturing PMI is expected to have a reading of 53.0, up from 51.8 a month earlier. The services PMI is expected to reach 54.2, slightly up from 54.7 in the previous month, while the composite PMI - which combines the services and manufacturing sectors - is expected to reach a reading of 54.7, slightly down from 54.9 in July.
According to the technical analysis of the pair: On the daily EUR/USD chart, the general trend is still bullish, and the bulls are waiting to cross the resistance barrier at 1.1900, which they tried to breach at the beginning of this month's trading. Whereas, breaking it will support the next upside move towards the 1.2000 psychological resistance, which confirms the extent of the bulls’ control over performance. As I mentioned before, moving towards the 1.1660 support will shake confidence in the current positive performance, and the pair will start the journey of reversal to the downside.
As for today's economic calendar data: There are no significant economic releases for the Eurozone. From the United States, building permits and housing starts data will be announced.
