EURUSD has been trending up since late September and is currently in the lower half of the trend channel, trying to gain momentum for another push to the upper end of the trend channel. In the short term, there is another uptrend (white) that is also supported by the 21-day moving average. This is a good setup for an upside move, and some fundamental data is also supporting the claim.
Eurozone PMI numbers are healthier than those of the US, and the Federal Reserve (FED) is nearing the end of its rate hike cycle, while the European Central Bank (ECB) still has a way to go, according to many ECB members. Additionally, the FED has been pumping more money into the banks in recent weeks to ease financial stress, which could be bearish for the dollar in the short to medium term, despite the ongoing Quantitative Tightening (QT).
Even though lots of indicators are still showing up, there is one key indicator that traders should be wary of. The net Euro positions are nearing their highest point. Whenever Euro positions accumulate too much, strong down moves have followed in the past. Since the 2008 crisis, the Euro has been hit four times. All four of these downturns started when Euro positions were too high. The average of EURUSD’s downward moves from the top points is 19.35%.
Despite the pessimistic signal from the Euro positions, it might be too early to draw conclusions for now. All four of the previous downturns had two tops before collapse, and for now, there is no top. Furthermore, EURUSD is still in an uptrend, and unless it is broken, there is no reason to worry yet. For the short-term, the 21-day moving average, which is at 1.0907 at the moment, is a key support to follow. If it is broken, the medium-term 100-day moving average, which is near 1.0733, could be the main support holding EURUSD from breaking down. For the upward movements, the 1.1040-1.11 zone is currently the main resistance. If a breakout occurs above that zone, the EURUSD bulls might gain more control over the price.
