Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Chart Of The Day: EUR/USD May Have Started Ascent Towards 1.25

By Fawad RazaqzadaCurrenciesFeb 19, 2021 11:53
uk.investing.com/analysis/chart-of-the-day-eurusd-may-have-started-ascent-towards-125-200458065
Chart Of The Day: EUR/USD May Have Started Ascent Towards 1.25
By Fawad Razaqzada   |  Feb 19, 2021 11:53
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
EUR/USD
-0.01%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GBP/USD
-0.82%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/JPY
+0.32%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
USD/CHF
+0.32%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GBP/CHF
-0.50%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DX
+0.08%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

This article was written exclusively for Investing.com

Today’s EU and UK manufacturing PMIs surprised to the upside and both the pound and euro rallied, with the cable hitting that $1.40 hurdle I have been forecasting for a while and GBP/CHF climbing to my 1.25 long-term target.

My focus is now turning to the euro, which could be about to break out soon and potentially head towards the 1.25 area next.

With the GBP/USD making its move first, the EUR/USD is now highly likely, in my opinion, to follow suit in climbing towards its own corresponding milestone of 1.25 handle next. That’s because these currency pairs have a strong positive correlation with one another, as you can see below:

 

3 months

6 months

1 year

EUR/USD vs. GBP/USD

+0.90

+0.90

+0.80

Beyond this simple correlation matrix, there are obviously several other reasons, including both macro and technical considerations, why I am bullish on the single currency.

From a macro point of view, the following are among some of the reasons, I hold a positive view towards the EUR/USD:

  • Optimism about a sharp global economic rebound due to the ongoing vaccine rollouts will likely keep foreign currencies, including EUR, supported against haven currencies like the USD, JPY and CHF—which means I am currently bullish on EUR/USD, EUR/JPY and EUR/CHF.
  • The fact that a no-deal Brexit was avoided at the back end of last year should be good news not only for the UK, but the Eurozone economy as well, further reducing longer terms risks.
  • The ECB is probably done with providing additional measures, which means Eurozone bond yields should climb as recovery takes shape.

More to the point, it is the charts and price action—reflecting the market’s collective thoughts and actions—that makes me uber-bullish on the EUR/USD.

The daily chart of the EUR/USD shows a clear bullish trend with rising moving averages and the price continuing to consolidate inside a bull flag pattern after holding its own above the key 1.20 support level:

EUR/USD Daily
EUR/USD Daily

What I would like to see next from a bullish point of view is a break above the shaded resistance range between 1.2150 and 1.2200. A clean break above this zone should offer decent buying opportunity on the rounded retest to potentially take us to new highs on the year.

The monthly chart is looking quite strong, too, with the long-term bear trend already having broken down in 2020 and with rates climbing and now holding above that 1.20 handle:

EUR/USD Monthly
EUR/USD Monthly

The fact that the EUR/USD has now moved back above the January 2021 low means that the sellers who were looking for a breakdown below 1.20 may have already been trapped. If the bears are indeed trapped, which I think is the case, then a quick rally above the January range, at 1.2350, is likely, where a cluster of sellers’ stop orders will surely be resting—thus providing a pool of liquidity for the market to reach for. This makes it likely we will see an accelerated move higher towards 1.25s in the coming weeks.

Meanwhile, the EUR/USD on this long-term time frame also seems to be following the path of the 2017-18 rally when rates surged higher earlier in the year before spending a few months in consolidation ahead of more gains in early parts of 2018. Since March last year, the EUR/USD has again rallied in a very similar fashion, consolidated for a while below the 1.20 handle and then broke out again. If this is anything to go by then a rally towards, and potentially beyond, 1.25 could be on the cards next.

So, the EUR/USD charts look quite bullish. As such, I would be more inclined to look for buying than selling opportunities as things stand and in any case until the charts suggest otherwise.

Chart Of The Day: EUR/USD May Have Started Ascent Towards 1.25
 

Related Articles

ING Economic and Financial Analysis
Hawkish Fed Hike Can Keep U.S. Dollar Bid By ING Economic and Financial Analysis - Sep 21, 2022

We expect a 75bp rate hike by the Fed today, accompanied by a hawkish tone and Dot Plot projections which may show a terminal rate around 4.25-4.50%. We think this could keep risk...

Chart Of The Day: EUR/USD May Have Started Ascent Towards 1.25

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Sujan Siderth
Sujan Siderth Feb 21, 2021 17:22
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks sirYour analysis is looking positive
James Smith
James Smith Feb 19, 2021 19:05
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Well said
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email