The EURUSD currency pair has attempted to build upward momentum from its recently established support level at 1.159. Further price movement remains unclear following the breakdown of the half-year uptrend in late July. However, the euro's resilience against the dollar preserves the potential for a trendline recovery. It would require the price to rise to 1.178.
From below, the quotes are protected by the 50-day moving average and the middle Bollinger Band, making the breakdown of support at 1.159 rather challenging for EURUSD sellers. The RSI indicator is in a neutral position and could move in either direction. A battle between bulls and bears would probably occur during attempts to consolidate above the 1.178 level—the previous local high. In this case, closing short-term long positions is recommended.
Fundamentally, the dollar’s weakening was caused by yesterday’s US inflation data. The price growth for July turned out to be slightly better than market participants had expected, prompting selling of the US currency. The likelihood of a September rate cut by the Fed climbed above 90%. Some Bloomberg-surveyed experts even suggested that borrowing costs could be reduced by 0.5% next month. The central bank took the same step last September, so the possibility of a repeat cannot be excluded.
Considering current market conditions, analysts at Bank of America recommend to open medium-term long positions on EURUSD. They see the 1.2 level as the main target. If quotes drop below 1.14, the growth scenario may be invalidated. BofA experts believe that any negative US news will trigger traders to sell the dollar. However, the bar of expectations regarding the EU economy is rather low, so the probability of positive surprises is much higher.
Consider the following trading strategy:
Buy EURUSD at the current price. Take profit: 1.178. Stop loss: 1.159.
This content is for informational purposes only and is not intended to be investing advice.
