Euro – Buy or Sell the Rally?

Euro – Buy or Sell the Rally?

Euro – Buy or Sell the Rally?

The euro is on a roll today, rising more than 1% against the U.S. dollar. This was the strongest one-day move for the currency pair in nearly a month and extends a 6-day recovery with pauses but no retracement. EUR/USD is still in a long-term downtrend but sentiment is shifting as investors find new reasons to buy euros. Whether the rally lasts remains to be seen but knowing how challenging the Greek debt negotiations will be going forward, we view the rally with caution and believe that it should lose momentum on the 1.12 handle. Fundamentally, the move was driven by data divergence, reversal of funding currency flows, hope that progress is being made in the Greek talks along with shifting expectations for Fed tightening after the Chinese stock market meltdown.

Technically, this is the first time in almost a month that EUR/USD closed above the 20-day SMA. However today’s rally stopped right at the convergence of the 50-day SMA, first standard deviation Bollinger Band and trend line resistance. This means that EUR/USD will either reverse from current levels and heads toward support at 1.0955 or break through resistance and march above 1.12.

Chart Of The Day

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