EUR/USD Breaks Above 1.0850 as Rising Equities and Gold Pressure US Dollar; Key Data Risks Ahead
The EUR/USD currency pair opened near 1.0840 after experiencing an overnight low of 1.08058, and subsequently saw a rally during the New York trading session. This upward movement pushed the pair above its 10-day moving average (10-DMA) to reach a high of 1.0850. The rally is notable as it extended gains amidst a backdrop of rising equities and gold prices, which generally exert additional pressure on the US dollar. The positive sentiment in equities and gold suggests a risk-on environment, which often leads to a weaker dollar as investors seek higher returns in other assets. The ability of EUR/USD to break above the 10-DMA is a significant technical development, indicating a shift in momentum and suggesting further bullish potential in the short term.
From a technical analysis perspective, the EUR/USD rally stalling near the top of a bull flag pattern on the daily charts is crucial. A bull flag is a continuation pattern, which suggests that after a period of consolidation, the previous uptrend is likely to resume. The rising daily and monthly Relative Strength Indices (RSIs) provide additional bullish signals. The RSI is a momentum oscillator that measures the speed and change of price movements, with readings above 50 generally considered bullish. The combination of a breakout above the 10-DMA and rising RSIs indicates strong upward momentum. However, traders should be cautious of potential resistance at the top of the bull flag pattern. Additionally, key economic data releases next week, such as the Euro Zone’s May HICP, US weekly claims, and April PCE, could introduce volatility and impact the pair’s direction. These data points are critical as they will provide insights into inflation and economic conditions, influencing central bank policies and market sentiment.
