The pair rallied above the 1.5000 level for the first time in two weeks on renewed risk appetite and on the back of an IMF report which stated the U.S. Dollar may still be overvalued.
The IMF Note on Global Economic Prospects and Principles for Policy Exit stated that “the U.S. dollar has depreciated in recent months as safe-haven flows have unwound. In real effective terms, it has moved closer to medium-run equilibrium (though it still remains on the strong side). U.S. dollar is now serving as the funding currency for carry trades.”
Comments suggest the Dollar has room to run lower, while the nation’s interest rate is set to remain at historic lows for an extended period.
Ahead, no major economic news will be released where traders will monitor equity markets for guidance. The Dow 10,120 will have to be broken for the EUR/USD to have a substantial run higher. Traders will be focusing on this level.
Looking at the 4hour chart, EUR/USD edged slightly above the 1.5000 level, before supply was met to head lower. The bias is bullish in the near term with equity markets being on focus.
Although lower levels are viable, further strength is still expected. Risk sentiment looks firm but EUR/USD may continue to be volatile. A preferred strategy looks to buy on dips.
Below current levels (1.4985), the pair finds initial support at 1.4923 (50.0% Fib 1.4834 to 1.5012) followed by 1.4902 and 1.4830.
Should the pair rise on futherd risk appetite, higher equity and commodity prices, the pair finds initial resistance at 1.45010.
Following this level, EUR/USD will encounter further resistance at 1.5040 and 1.5100.
Trading levels in play:
Limit Buy @ 1.4904 Targets: T1 1.4922 – T2 1.5030 Risk: 1.4842
* After 15 pips profit move stop to entry, take profit at will. Trade is canceled if it rebounds near entry and moves higher by 20 pips. Comments will follow if outlook changes.
