The EUR / USD exchange rate is trading at a high 2020 level before the Fed rate decision

EUR / USD Pair Rate Talk Points

The EUR / USD is trading at a new high in 2020 (1.1699) ahead of the Federal Reserve interest rate decision on July 29, and current market conditions may keep the exchange rate afloat as long as the Index of Relative Strength (RSI) is in overbought territory.

The EUR / USD exchange rate is trading at a high 2020 level before the Fed rate decision

EUR / USD has pulled out the March high (1.1495) as bull flag formation in July the RSI helped validate the continuation pattern as the oscillator bounced along the trendline support to preserve the uptrend from March.

In turn, the EUR / USD may continue to carve a series of higher highs and lows as long as the RSI remains above 70, and bullish price action may persist at the Federal Open Market Committee (FOMC) meeting. as the appreciation in the exchange the rate continues accompanied by overcrowding behavior in the US dollar.

The last update of theIG Customer Sentiment Report shows the ratio of short to long operators is now by 2.55 to 1 I eat alone 28.20% of merchants arenet length EUR / USD, with the crowd netting the pair since mid-May. The number of net traders is 3.58% lower than yesterday and 7.52% higher than last week, while the number of net traders is 3.04% higher than yesterday and 8.74% lower than last week.

It appears that the EUR / USD rally is fueling long net interest as it clears the 2019 high (1.1570), while the decline in net short positions suggests that stop-loss orders are firing as the rate exchange rate is quoted at new annual highs. .

It remains to be seen whether overcrowding behavior in the US dollar will persist as the FOMC continues. promises to “increase your holdings of Treasury and MBS (Mortgage Backed Security) and CMBS (Commercial Mortgage Backed) at least at the current rate” but current market conditions can keep the EUR / USD afloat as long as the RSI is in overbought territory and remains above 70.

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EUR / USD daily rate chart

Source: Commercial view

• Note that EUR / USD was unable to test the March high (1.1495) in June amid lack of momentum to break / close above Fibonacci overlay around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), with Relative Strength Index (RSI) receding from territory overbought during the same period after triggering an Extreme Read for the second time in 2020.
• However, a ‘golden cross’ materialized towards the end of June when the 50-day SMA (1.1263) crossed above the 200-day SMA (1.1074), with the RSI bouncing along the support of the line of trend to retain the uptrend from earlier this year.
• It will closely follow the RSI as it triggers an overbought reading for the third time in 2020, with Bullish price action in EUR / USD like persist as long as the indicator stays above 70 amid the behavior seen in June.
• The bullish flag formation collapsed after the failed attempt to close below the region of 1.1190 (down 38.2%) to 1.1220 (78.6% expansion) in July, with the continuation pattern producing a break from the 2019 high (1.1570) as EUR / USD carves A series of higher ups and downs.
• You need a break / close above the region of 1.1670 (50% retracement) to 1.1710 (61.8% retracement) to open the September 2018 high (1.1815), which largely aligns with the Fibonacci overlay around from 1.1810 (61.8% retracement) to 1.1850 (100% expansion).

— Written by David Song, currency strategist

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