- EUR/USD has risen amid falling Fed tapering expectations and a full vaccine approval.
- An upgrade to German GDP and Europe’s better covid situation support further gains.
- Tuesday’s four-hour chart is showing the pair recaptured a downtrend resistance line.
Dead-cat bounce? Not this time. After a steadfast rise of 90 pips, EUR/USD’s upward journey looks like a change of course rather than a temporary correction. The swing is mostly fueled by dollar weakness, but the euro has new reasons to rise.
The safe-haven greenback has been under selling pressure after the US Food & Drugs Administration (FDA) gave a full approval to the Pfizer/BioNTech COVID-19 vaccine. It only had emergency authorization beforehand. Apart from potentially helping convince hesitant Americans to get a shot in the arm, it also facilitates vaccine mandates for institutions and companies.
Broader immunization could help defeat the disease and especially the highly transmissible Delta variant wreaking havoc in America and imply stronger growth for the entire world, thus sending other currencies higher against the dollar. In the meantime, the virus weighs on the currency in another way.
Markets eagerly await the Federal Reserve’s Jackson Hole event later in the week, with Chair Jerome Powell’s speech on Friday being the highlight. However, by announcing the event will be held virtually, the Fed signaled that withdrawing support is somewhat less urgent. If the almighty central bank is forced to scale down its activity due to Delta, the American economy probably needs additional assistance for now.
See Dollar selling opportunity? Three reasons (and charts) explaining why the King may crash
On the other side of the pond, the euro benefits from an upgrade to German growth figures for the second quarter. The continent’s largest economy expanded by 1.6% according to updated statistics, compared with 1.5% originally reported.
More importantly, Europe is dealing better with coronavirus at this point, not only leading in vaccinations but also suffers from fewer cases. While infections are rising in the US, they are edging lower in the eurozone. Fears of a worrying uptrend in Germany have subsided.
Overall, fundamentals are pointing to another day to the upside.
EUR/USD Technical Analysis
Euro/dollar has jumped above the broken downtrend resistance line that has been accompanying it since the beginning of the month and also topped the 50 Simple Moving Average on the four-hour chart. A third bullish sign is Momentum, which has turned to the upside. All in all, the trend is turning positive.
Resistance is at a daily high of 1.1748. It is followed by 1.1780 and 1.1805, which capped the pair last week, and then by 1.1825.
Support awaits at 1.1720, a cushion from last week, and then by 1.1705, 1.1690 and 1.1660, the latter being the 2021 trough.
View more information: https://www.fxstreet.com/analysis/eur-usd-forecast-euro-has-fresh-reasons-to-rise-after-recapturing-downtrend-resistance-202108240653