Stock and currency markets have paused to look around in anticipation of new monetary policy and economic signals. While many equity indices are cruising near historic highs, the current levels are not uncharted territory for the currency market.
The level of 1.2250, where the EURUSD encountered significant resistance earlier last month, is the centre of the crucial pivot range in the 1.201.25 area, where the most pivot points since 1998 are concentrated.
We have seen that a strong breakup of this area opens the way for a solid multiyear move. On the other hand, a reversal could lead to a strong rebound that would set the pair back from this area for many months.
Earlier this year, EURUSD pulled back from above 1.2000, the second unsuccessful attempt to storm the critical resistance level since 2018.
In April and May, EURUSD rallied quite briskly but slowed sharply at levels above 1.2000, losing all impulse on the way to 1.2200. Such slippage in this crucial area may reflect that the market is not ready to switch to a prolonged weakening dollar trend.
On the other hand, shortterm indicators suggest that we may now see a tactical retreat of the EURUSD bulls. The RSI on the daily charts has moved away from the overbought area at the end of April. The 200 and 50day moving averages are below the price line, marking bullish dominance.
However, the shortterm tactical balance of power can be deceptive when multiyear trends are on the scales. Investors and traders also…