- Higher stock prices weaken the dollar.
- DXY corrects lower after rising for a week.
- EUR/USD rises on Friday, continues lower for the week.
The EUR/USD recovered from the intraday low since 2017 and climbed back above 1.0400 late on Friday amid improving risk sentiment and a US dollar correction. Still, the euro is headed for the lowest weekly close since December 2002.
Stocks rise, dollar falls
A recovery in stock prices weakened the dollar which turned negative across the board. DXY is falling for the first time in seven trading days. US yields remain stable, not following the improvement in risk sentiment. At time of writing, the Dow Jones gains 1.56% and the Nasdaq 3.64%. EUR/USD is trading near the daily high around 1.0410, after earlier falling to 1.0348.
Risk sentiment is the key factor on Friday. US economic data showed a larger than expected decline in consumer confidence to the lowest level since 2011. The Fed’s Kashkari mentioned that inflation is too high and explained that a recovery in the supply chain could help the Fed.
technical perspective
EUR/USD is about to register the sixth consecutive weekly decline. “Technical readings in the broader outlook reflect strong bearish momentum that would likely favor further declines in the coming weeks. However, a corrective advance or at least another phase of consolidation is on the table and would help improve the dominant trend”, explained Valeria Bednarik, Chief Analyst at FXStreet.
According to Bednarik, the daily chart shows that the technical indicators “have started to show signs of bearish exhaustion. The RSI indicator is now flat around 26, while the Momentum indicator is pointing slightly higher from a multi-week low.” She places the main downside target and immediate support level at 1.0339, the lowest since January 2017. “Once below the latter, you should see the pair approaching the 1.0200 figure, and traders start talking about parity.”
Technical levels
Source: Fx Street
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