Investing.com - Financial Markets Worldwide
Get 40% Off
Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Euro Looks Too Hot To Handle

ByFxPro Financial Services Ltd
AuthorAlexander Kuptsikevich
Published 08/04/2020, 06:20 AM
Updated 03/21/2024, 07:45 AM

After a short pause on Friday and Monday, the pressure on the dollar has returned. The dollar index is losing 0.2% on Tuesday after a two-day 0.8% bounce.

In our opinion, the dollar appears oversold, which increases the chances of a rebound. On the daily RSI for the EUR/USD pair, the two peaks are approximately at the same level, while the price chart keeps rewriting highs. Such divergence often precedes corrective pullbacks.

EURUSD seems overbought

However, currently, the RSI remains above 70, reflecting that bullish sentiment is still in place. This means that the rise in the pair may continue for some time and could even reach new multi-month highs.

As a rule on FX, the longer the growth continues, the deeper and wilder the later correction will be. If we recall, at the beginning of 2020, some, including us, pointed to an overheated US market, based on a similar divergence of RSI and the price. However, the initial coronavirus outbreak sparked the weakening of the markets and quickly turned into one of the sharpest collapses in more than 100 years of market history.

SPX got big blow after similar divirgence with RSI earlier this year

The prior situation of the market being overbought didn’t play a role in the coronavirus crash. It should be noted that EUR/USD is doomed to decline from the current levels but may well be able to show an increase in the next couple of days.

However, it seems premature to join short-term purchases – its much more reasonable to wait for the pair to correct after a rapid rally or a long sideways trend.

The FxPro Analyst Team

Latest comments

Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.