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It looks like pullback in EUR/USD may be coming to an end. Will forex traders push the pair back into its longer-term trend higher?

EUR/USD Uptrend to Resume?

EUR/USD Daily Forex Chart
EUR/USD Daily Forex Chart

We’ve got a setup potentially forming on the daily EUR/USD chart that could draw in both fundamental and technical traders back to the long side.

From a fundamental perspective, the U.S. dollar has been knocked down for a while now on the perception that the Federal Reserve will stay extremely accommodative to support the pandemic beaten U.S. economy. And with a potential $1.9T stimulus package in the works, the odds of the Greenback remaining under pressure is likely better than even.

Also, with no major events ahead for the rest of February to potentially shift sentiment in the Greenback or the euro, odds are likely the forex traders will continue to lean fundamentally bearish on the Greenback for now. The only possible scheduled event to throw that off would likely be the flash manufacturing PMI updates from Europe (Feb. 19th), but I guess we’ll just have to wait and see what we get then.

So, the broad Fed stimulus and pandemic recovery stories are likely why we’re starting to see EUR/USD draw in buyers after it retested a broken resistance area around the 1.2000 major psychological level. This area also lines up with the Fibonacci retracement area of the most recent swing move higher, and with stochastic showing potentially oversold conditions, it’s likely technical traders are hopping back on to play the longer-term trend higher.

If these conditions hold and we don’t get a surprise catalyst in February to throw off USD bearishness and the recovery themes, then this little bounce in EUR/USD could turn into a fresh leg higher.

What do you guys think? Is EUR/USD ready to resume the trend? Or is this just a bounce in the new trend lower? 

Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

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