Euro turns bullish on rise in investors’ confidence

Overwhelmingly positive non-farm employment change data assisted the US dollar to regain bullishness last week. On the other hand, the Eurozone’s June economic data, reflecting a decline in the German factory orders and contraction in the industrial production in Italy, ensured weakness in the Euro.

While the market participants were expecting the US dollar to extend gains this week, the latest economic data from the US and the analysts’ opinion about the possibility of a rate hike, as discussed underneath, indicate that the bullish sentiment towards the US dollar no longer exists.

Thus, we believe that the EUR/USD pair would re-capture the territory it lost last week.

The US Bureau of Labor Statistics announced that the labor productivity of the non-farm business sector has sequentially declined by 0.5% in the second-quarter of 2016. The institution also stated that the output increased by 1.2%, while the work hours increased by 1.8%. The labor statistics department also noted that the productivity declined 0.4% on a yearly basis.

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The report has given rise to concerns about the possibility of a Fed hike in the second-half of 2016. Hirokazu Kabeya, the chief global strategist at Daiwa securities believes that the US economy is not doing exceptionally well to warrant a Fed hike. Echoing his views, Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management stated that the low productivity growth indicates the possibility of an unimpressive third-quarter and so the Fed will not have enough room to consider an interest rate hike.

On the other hand, the monthly sentiment survey report from Sentix research group of Frankfurt indicates that the Eurozone investors have shrugged off the Brexit related fears. The index reading jumped to 4.2, from 1.7 in July. The analysts anticipated a reading of 3.6. Thus, fundamentally, the EUR/USD will remain in an uptrend in the days to come.

Among the oscillators, the RSI has already entered the bullish zone, while the stochastic is about to enter. The EUR/USD currency pair is also moving within the ascending channel. So, the pair can be expected to move upwards and test the next resistance at 1.1330. The support for the EUR/USD pair exists at 1.1100.

A long position can be taken by a Forex trader near 1.1100, with a stop loss order below the 1.0950. The long position can be closed at 1.1300.

In the same manner, a binary trader can pick a one touch call option contract from a preferred broker. By selecting a contract target price of 1.13 or lower, the trader can increase the probability of making money from the trade. If the expiry date of the contract falls in mid-September, then it will be beneficial to the trader.

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