EURUSD – Will Confirmation Trigger Another Rally

The euro has been boosted against the dollar since last Friday following the release of the US Q2 GDP data that delivered a hammer blow to rate hike chances and therefore the greenback.

EURUSD Daily

OANDA fxTrade Platform

The moves that followed took the pair through the 1.1150 resistance that it had traded primarily within for the month prior to the data and further upside may be on the cards.

The pair broke as high as 1.1240 yesterday – a prior level of support – before heading back to the level that had provided so much resistance over the last month. How the pair reacts at this level could offer great insight into where it’s headed next.

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It’s also worth noting that the 50 fib level – 7pm 28 July lows to 2 August highs – also falls within this previous resistance zone, which could offer further support.

EURUSD 4hr

Should it find support at this once important resistance level, it would act as confirmation of the initial break and could trigger another rally in the pair.

If this does happen then the first key obstacle to the upside would be yesterday’s highs, followed by 1.13 which has been a notable support and resistance level in the past.

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That said, confirmation of the break at 1.1150 would indicate to me that the market has turned much more bullish on the pair and suggest a move higher could be on the cards. If so, we could see 1.14 and even 1.15 tested in the coming weeks, something we haven’t seen since the Brexit vote.

It’s worth noting that this appears to be primarily a dollar driven move and so if anything changes from a dollar perspective, be it a strong jobs report on Friday or hawkish commentary from Fed officials for example, this moves could be quickly reversed.

As you can see from the OANDA Forex Order Book, below, there are a large number of pending buy and sell orders around the 1.1150 level which suggests this is going to be a key level of interest.

Forex Order Book

This and many other tools can be found in the Forex Labs section of the OANDA website.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.