U.S. Dollar Edges Up Against Euro
2022.06.07 14:05
The greenback strengthened versus the euro before the opening of the North American session yesterday. Although there were neither macroeconomic reports nor fundamentals to affect the market somehow, the rise came. Therefore, it can be assumed that the increase came due to technical factors. Indeed, when there are no fundamentals, technical factors usually affect the market. Another reason could be that market participants no longer believe in the growth potential of the euro. ECB officials have already hinted at the possibility of a rate hike.
The high likelihood of a rate increase – the first one since 2011 – should be driving the euro up. However, concerns are now growing about the general state of the European economy and the rising risks of energy shortages in the EU. After the recent ban on Russian commodities, German Chancellor Olaf Scholz even visited Africa in a search for alternatives. At this point, one thing is clear: it would cost the EU a penny to replace Russian oil and gas. Above all else, inflation in the eurozone remains on the rise. In this light, market participants can hardly remain optimistic about the euro’s potential.
EUR/USD has traded in the wide range between 1.0636 and 1.0800 for two weeks, indicating a slowdown in the corrective move from the support of 1.0350.
The Relative Strength Index (RSI) moves between lines 50 and 70 on the daily chart, confirming the corrective move. In the past two weeks, the indicator also fluctuated near line 50 amid sideways trading. This, in turn, proves the slowdown in the corrective move. On the 4-hour chart, the RSI crossed line 50 from top to bottom, sending a sell signal.
There are multiple crossovers of the Alligator’s MAs on the 4-hour chart, which can be interpreted as a signal of a weaker corrective move. On the daily chart, the Alligator’s MAs are heading up, showing a bullish cycle.
Outlook
The pair is expected to remain in the 1.0636/1.0800 range. A breakout of one of the range’s limits will determine whether it is a downtrend or the prolongation of the corrective move.
As for complex indicator analysis, there is a mixed-signal for short-term and intraday trading due to the flat market. Indicators are signaling to sell the instrument as the price moves to the lower sideways range limit. In the medium term, the continuation of the correction makes a buy signal.
EUR/USD price chart.
