Two trades to watch: EUR/USD, FTSE
Fiona Cincotta August 23, 2021 7:31 AM
EUR/USD extends gains from 9 month low as risk sentiment improves, USD eases. Eurozone & US PMI data in focus. FTSE rebounds after worst weekly performance in 6 months. Commodity stocks set to recover as China sees zero locally transmitted covid cases. UK PMI data in focus
EURUSD extends gains, PMI data in focus
EUR/USD is attempting to extend its recovery from a 9 month low reached last week.
The risk on mood in the market is pressuring the US Dollar. Investors are betting this means the Fed could be less inclined to look to tighten policy now that the Jackson Hole symposium has gone online.
News that Australia and New Zealand are reviewing their covid strategies has lifted the market mood.
Attention now turns to Eurozone flash PMIs for August for both services and manufacturing which will shed fresh light on the economic recovery.
Expectations are for a slight easing in growth. The composite PMI is expected to slip to 59.7 in August, down from 60.2 in July.
Where next for EUR/USD?
EUR/USD has been trending lower since late May. The index trades below its multi-month descending trendline, below its 50 & 200 sma on the 4 hour chart. The price rebounded off a 9-month low of 1.1664 last Friday and is extending those gains.
The RSI points higher and is in bullish territory suggesting that there is more upside to come.
The recovery would need to retake the 50 sma resistance at 1.1730 in order to push higher to 1.1800 the descending trendline resistance, 200 sma and mid-August high – which could prove a tough nut to crack.
On the flip side, support can be seen at 1.1700 round number and 1.1664, last week’s low.
FTSE rises as risk sentiment improves, UK PMIs up next
The FTSE along with its European peers is looking to start the week on a stronger footing bouncing back from its worst weekly performance in 6 months last week.
Improved risk sentiment after Chinas reported no new locally transmitted COVID cases for the first time since July.
Commodity prices rise on the improved outlook for China and the weaker US Dollar on safe haven outflows.
UK PMI data in focus. Both services and manufacturing PMIs are expected to see growth cool slightly.
Where next for the FTSE?
The FTSE is extending its rebound from 6990 its monthly low reached last week. The recovery has boosted the price back above the 200 sma on the 4-hour chart and pushed above 7115 negating the recent down trend. The RSI is indicating that further upside could be on the cards.
The recovery must retake the 50 sma at 7150 in order to extend the gains to 7170 the descending trendline resistance. A move above here could see the buyers gain traction and move towards resistance at 7200 the round number and mid-August high.
On the flip side a move below 7080 the 200 sma and horizontal support could see sellers target 6990 the August low.
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