ECB's talk of ending negative interest rates by Q3 with the possibility of positive rates in the not-to-distant future has got EUR/USD all fired up after what has been an abysmal year in terms of performance. The recent consolidation in short-dated US yields has also lent support to the single currency, which surpassed the prior 5 May 1.06420 swing high on Monday.
Has EUR/USD Switched From Downtrend To Uptrend?
Perhaps, you may want to wait for more confirmation that things have changed before raising your convictions. For one, no matter the higher time frame, whether daily or weekly, EUR/USD is well below its 200 exponential moving averages, which are still downward sloping. If the price surpasses the last March weekly swing high of 1.11849, I’d be confident that something big is brewing.
EUR/USD, however, is still a considerable distance from those levels and is of little help to those who are considering buy orders. For them, the 50% and 61.8% Fibonacci retracement levels of 1.07774 and 1.08773, respectively (between the March swing high of 1.11849 and May swing low of 1.03492) may be of more interest.
If these levels fail to hold as resistance, the odds that EUR/USD is truly changing tend are likely to increase dramatically. They may also be ideal to scale out of positions if you have the nerve to go long EUR/USD at current levels.
Given the size of the last impulsive wave downwards relative to the prior corrective wave, there is a good chance EUR/USD could find itself range-bound for a reasonable time, ahead of any potential change in trend.