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EURUSD: price action slams into horizontal resistance

EURUSD traded higher on Thursday, November 19, with the key pair climbing 0.17% to 1.1873. The price slid to 1.1816 during the European trading session. Euro pairs took a hit from ongoing escalation of new Covid-19 cases across the globe, as well as downbeat Brexit news.

In Germany, 296 deaths were recorded over the past 24 hours, while 23,464 people were infected. The death toll reached 653 in Italy and 501 in the UK. Covid-19 is putting pressure on markets, but vaccine news has helped offset some of the negativity.

Pfizer and Moderna Vocid-19 vaccines may be approved for use in the US over the next few weeks. American authorities are ready to start distributing the vaccines within 24 hours of receiving regulatory approval.

EU chief negotiator Michel Barnier said Brexit talks were briefly suspended as one of the participants tested positive for coronavirus. British negotiator Frost said he remains in contact with Barnier.

A sharp bounce from 1.1816 to 1.1880 was triggered by news stateside. The dollar index (DXY) retreated on news that Republican and Democratic leaders in the Senate agreed to resume talks on a coronavirus relief bill. This announcement gave a boost to equities and major currencies against the greenback.

Todays macro agenda (GMT+3)

16:30 Canada: retail sales (October)

18:00 US: consumer confidence index (November)

21:00 US: Baker Hughes weekly oil rig count; G20 meeting also to be held on Friday

1

Current outlook

Buyers reached a high of 1.1891 in In Asian trading on Thursday, and the decline halted at about the 67-degree line of the Gann fan. Growth also slowed down in the vicinity of the 67-degree line (1.1896). News from the US canceled the pinbars that formed on Tuesday and Wednesday as a bullish candlestick with a long lower shadow took shape. Bullish sentiment intensified.

Buyers have broken out of the trendline that runs through the tops at 1.1920, 1.1894 and 1.1891. The price action is currently stuck around the horizontal resistance formed by the last two tops.

We would also like to note that the price action is hovering near the upper bound of a side channel built on three points: 1.1814, 1.1816 and 1.1894. A cluster of levels around 1.1890 catches the eye. If buyers can break out of this level, they will push upward to the 90-degree line, and then move on to 1.1925. The question is whether Europe will support the Asian trend, and we note that today’s macro agenda is empty. Given the situation surrounding Covid-19 and Brexit, we think buyers will be hard pressed to move higher without fairly strong support from the news flow.

Major currencies are trading in positive territory, while the yen is in negative territory. The market has started to take greater interest in risk assets. The picture is mixed regarding euro crosses. Since speculators are robustly buying into the kiw and the aussie, crosses with these currencies are trading in the red. If buyers are unable to break out of 1.1890, we should expect a downward correction towards the 1.1860 balance line. The 45-degree line degree runs through 1.1837, so it will be the first target for sellers.

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