EUR/USD Rate Forecast: RSI to Validate Bull Flag Formation

EUR/USD Rate Talking Points

The technical opinion for EUR/USD stays constructive going into a second half of 2020 as a longhorn dwindle arrangement takes shape, and a Relative Strength Index (RSI) might countenance a settlement if a oscillator continues to lane a bullish trend from progressing this year.

EUR/USD Rate Forecast: RSI to Validate Bull Flag Formation

Looking ahead, uninformed information prints entrance out of a Euro Area might change a near-term opinion for EUR/USD as a refurbish to a Euro Zone Consumer Price Index (CPI) is approaching to uncover a core rate of acceleration squeezing to 0.8% from 0.9% per annum in May.

Image of DailyFX mercantile calendar for Euro Area

The growth might drag on a Euro as it puts vigour on a European Central Bank (ECB) to serve support a financial union, and Governing Council officials might continue to order out a V-shape liberation as a economy is approaching to lapse to pre-pandemic conditions “at a finish of 2022.”

However, a new debate by ECB house member Yves Mersch suggests a executive bank is in no rush to broach additional financial support as a central insist that “we would not need to make use of a full PEPP (pandemic puncture squeeze programme) envelope if a Governing Council were to consider that marketplace tensions had eased sufficiently.

Mersch goes onto contend that a a COVID-19 liberation account “would revoke a weight on financial process and a need for serve easing of a process stance,” and efforts by mercantile authorities might pull a ECB to a sidelines as European Council President Charles Michel vows to ‘start genuine negotiations with a member states, and will assemble an in-person summit, around mid-July in Brussels.’

In turn, a ECB might merely try to buy time during a subsequent assembly on Jul 16 even yet a Governing Council stands prepared to “adjust all of a instruments,” and a hostility to exercise reduce seductiveness rates might keep EUR/USD afloat as President Christine Lagarde and Co. seem to be on lane to keep a stream process in a second half of a year.

With that said, EUR/USD might theatre another try to exam a Mar high (1.1495) as a sell rate retreat forward of a monthly low (1.1101), and a longhorn dwindle arrangement might reveal over a entrance days as a Relative Strength Index (RSI) clings to a bullish trend from March.

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EUR/USD Rate Daily Chart

Image of EUR/USD rate daily chart

Source: Trading View

  • Keep in mind, a monthly opening operation was a pivotal energetic for EUR/USD in a fourth entertain of 2019 as a sell rate forged a vital low on Oct 1, with a high for Nov occurring during a initial full week of a month, while a low for Dec happened on a initial day of a month.
  • The opening operation for 2020 showed a identical unfolding as EUR/USD noted a high of a month on Jan 2, with a sell rate figure a Feb high during a initial trade day of a month.
  • However, a opening operation for Mar was reduction applicable amid a pickup in volatility, with a pullback from a yearly high (1.1495) producing a mangle of a Feb low (1.0778) as a sell rate slipped to a uninformed 2020 low (1.0636).
  • Nevertheless, EUR/USD seemed to be on lane to exam a Mar high (1.1495) after violation out of a Apr range, though a sell rate struggles to keep a allege from a start of Jun amid a unsuccessful try to tighten above a Fibonacci overlie around 1.1390 (61.8% retracement) to 1.1400 (50% expansion).
  • It stays to be seen if a longhorn dwindle arrangement will reveal over a entrance days asa ‘golden cross’ takes shape, with a 50-Day SMA (1.1051) channel above a 200-Day SMA (1.1034) forward of a second half of a year.
  • The Relative Strength Index (RSI) might countenance a patterns as if a oscillator continues to lane a bullish trend from progressing this year, though disaster to miscarry from trendline support negates a range for a longhorn dwindle arrangement as a growth signals a intensity change in EUR/USD behavior.
  • Lack of movement to tighten above a 1.1340 (38.2% expansion) jump also undermines a range for a delay settlement as EUR/USD slips subsequent a 1.1270 (50% expansion) to 1.1290 (61.8% expansion) region, with a sell rate contrast a Fibonacci overlie around 1.1190 (38.2% retracement) to 1.1220 (78.6% expansion) during a start of a week.
  • Failure to reason above a 1.1190 (38.2% retracement) to 1.1220 (78.6% expansion) segment might coax a pierce towards 1.1140 (78.6% expansion), with a subsequent area of seductiveness entrance in around a 1.1100 (78.6% expansion) handle.
  • Need a tighten above 1.1340 along with an prolongation of a bullish RSI arrangement to move a 1.1390 (61.8% retracement) to 1.1400 (50% expansion) segment on a radar, with a subsequent area of seductiveness entrance in around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), that mostly lines adult with a monthly high (1.1423).

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— Written by David Song, Currency Strategist

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