EUR/USD finally snaps higher in overnight move back above 1.15, what's next?

Technical Analysis

Author: Justin Low | eurusd

EUR/USD finally breaks out of the 1.13 to 1.15 range


The snap back above 1.1500 has been a little underwhelming to say the least but it is understandable to some extent considering the resistance levels between 1.1500 and 1.1600 as well as the euro itself suffering from poor economic data as of late.

However, I would argue the break of the 1.1500 handle is more symbolic at this point more than anything else. With the pair now moving back above the key level, what's next?

The short version is that this precipitates further dollar weakness down the road. Fed officials have erred more to the dovish side and yesterday's comments only solidifies that notion. Right now, it is looking ever more increasing that the Fed will pause its rate hike cycle indefinitely until there is room (economic conditions allowing for it) to press forward with more rate hikes.

The longer version of the outlook is that it isn't going to be smooth sailing for EUR/USD to gain in a straight line. Sure, we may see it push higher towards testing the 200-day MA (blue line) @ 1.1629 but the euro itself is struggling as Eurozone economic and inflation outlook is seen to weaken further in the coming months.

Hence, the argument will be which of the two between the dollar and the euro is the worst of a bad bunch (looking at you too, sterling)? I'm not going to argue with a technical break above 1.1500 and the 100-day MA (red line). Those are strong indicators for an upside push for the time being.

But I would be skeptical if the upside momentum here turns really bullish and will look towards shorting the pair at levels above the 200-day MA and closer towards 1.1800. Once you put the US government shutdown aside, it's hard to justify that the US economy is underperforming worse than the Eurozone economy at this point so that should help to give the dollar some backing down the road unless the Fed decides to pursue rate cuts in the months ahead (still very unlikely at the moment).

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