EUR / USD on track to push above 50-day SMA after Fed testimony

EUR / USD Rate Talking Points

EUR / USD is on the verge of pushing above the 50-day SMA (1.0607) as it prolongs the advance after Federal Reserve interest rate decisionand a move above the moving average may lead to further exchange rate gains, as the testimony of President Jerome Powell does little to slow the progress from the monthly low (1.0359).

EUR / USD on track to push above 50-day SMA after Fed testimony

The EUR / USD appears to have reversed after defending its annual low (1.0349), and progress from earlier in the month may lead to a test of the previous support zone around the May high (1.0787) as it now looks out to act as resistance.

Looking ahead, it remains to be seen whether the EUR / USD will respond to the 50-day SMA (1.0607), as the moving average continues to reflect a negative slope, but the limited response to the Fed’s semi-annual testimony increases the chances of a further appreciation of the exchange rate, although Chairman Powell insists that “tThe US economy is very strong and well positioned to handle a tighter monetary policy.

The comments suggest that the Federal Open Market Committee (FOMC) will deliver another 75bp interest rate at its next interest rate decision on July 27, as officials predict a steeper path for US interest rates, and it is still unknown whether President Powell will continue. to tame speculation. for a rate hike of 100bp as the central bank governor warns that it will be “very challenging” to create a soft landing for economy.

Until then, the EUR / USD may stage a major recovery after the failed attempt to test the annual low (1.0349), but the slope of the retail sentiment appears to continue as traders have been net-far paired most of the year.

Image of IG Client Sentiment for EUR / USD exchange rate

That IG Client Sentiment report show 60.83% of traders are currently not-long EUR / USD, with the ratio of dealers long and short standing up at 1.55 to 1.

The number of traders net-long is 12.70% lower than yesterday and 17.50% lower from last week, while the number of traders net-short is 14.33% higher than yesterday and 41.01% higher from last week . The decline in the net-long position comes as the EUR / USD approaches the 50-day SMA (1.0607), while the jump in the net short-term interest rate has helped to offset the slope in the retail mood, as 68.58% of traders was the net-long pair last week.

With that said, the EUR / USD may try to push above the moving average as it prolongs the advance following the Fed exchange rate decision and the exchange rate may eventually test of the former support zone around the May height (1.0787) as it appears to act as a resistor.

EUR / USD Exchange rate daily chart

Picture of EUR / USD exchange rate daily chart

Source: Trade show

  • EUR / USD is approaching 50-day SMA (1.0607) after failing to close below the 1.0370 (38.2% expansion) region, with Relative Strength Index (RSI) turn in front of oversold territory as the exchange rate defends annual lowest level (1.0349).
  • A movement above the moving average can push EUR / USD against 1.0640 (78.6% expansion) areawith a break / close over the 1.0710 (100% expansion) region that opens the Fibonacci overlap around 1.0760 (61.8% expansion) to 1.0780 (100% expansion), which is in line with the monthly high (1.0774).
  • It remains to be seen whether EUR / USD will respond to the moving average as the indicator continues to reflect a negative slope but needs a close back below the 1.0500 (100% expansion) lever to bring 1.0370 (38.2% expansion) region back on the radar.

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— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong