EUR/USD rises back above 1.0400 from multi-year lows as stocks soar
- Higher equity prices weaken the dollar.
- DXY corrects to the downside after rising during a week.
- EUR/USD up on Friday, still down for the week.
The EUR/USD rebounded from the lowest intraday level since 2017 and climbed back above 1.0400 late on Friday amid an improvement in risk sentiment and a correction of the US dollar. Still, the euro is headed toward the lowest weekly close since December 2002.
Stocks up, dollar drops
A recovery in equity prices weakened the greenback that turned negative across the board. The DXY is falling for the first time in seven trading days. US yields remain steady, not following the improvement in risk sentiment. As for writing, the Dow Jones gains 1.56% and the Nasdaq 3.64%. EUR/USD trades near daily high around 1.0410, after falling earlier at 1.0348.
Risk sentiment is the key driver on Friday. Economic data from the US showed a larger-than-expected decline in Consumer Confidence, to the lowest since 2011. Fed’s Kashkari mentioned that inflation is much too high and explained that a recovery in the supply chain could help the Fed.
Technical outlook
The EUR/USD is about to post the sixth weekly decline in a row. “Technical readings in the wider perspective reflect a strong bearish momentum that would likely favor additional declines in the upcoming weeks. Nevertheless, a corrective advance or at least another consolidative phase is on the cards and would help to enhance the dominant trend,” explained Valeria Bednarik, Chief Analyst at FXStreet.
According to Bednarik, the daily chart shows technical indicators “have begun giving signs of bearish exhaustion. The RSI indicator is now flat at around 26, while the Momentum indicator aims marginally higher from a multi-week low.” She places the main bearish target and the immediate support level at 1.0339, the low from January 2017. “Once below the latter should see the pair approaching the 1.0200 figure, and traders start jawboning about parity.”
Technical levels