Euro Paradoxically Rallied Despite Political Risks

Dear Traders,

It was a paradox: The euro shrugged off political risks from Italy and rallied towards 1.08 amidst political uncertainties in Europe. The short squeeze in the EUR/USD can be explained by profit taking after the euro rejected to extend its losses beyond 1.05. However, given the anti-establishment mood sweeping around the world we doubt that the euro can hold onto its recent gains. Thus, dollar bulls may jump in again and take this opportunity to sell EUR/USD at higher levels. Nevertheless, we will also discuss a potential bullish scenario.

If the euro rises above 1.08, traders will be asking “How high the euro might go?”. So let’s try to figure it out.

EUR/USD

Given the impressive bull candle in the daily chart, we might see further upward movement before the euro reverses. In short-term time frames a next resistance could be at 1.0830/50, followed by a stronger resistance zone at 1.0950. If the euro takes the next hurdle at 1.0830, chances increase that it heads for a test of 1.0960. Above 1.0970 however, the euro may rises towards 1.1030 and perhaps even towards 1.11. Current supports are however seen at 1.0650 and 1.06.

chart_eur_usd_daily_snapshot6-12-16

GBP/USD

The cable is still on the rise but we expect gains to be limited until 1.2760 and 1.28. A significant break above 1.28 may drive the pair towards 1.2860 but then we may see some pullbacks. Crucial supports are seen at 1.26 and 1.25, which is why sterling bears should rather wait for a break below 1.2480.

chart_gbp_usd_daily_snapshot6-12-16

 

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