EURUSD seems to have bullish momentum on its side at the moment, as price is moving inside an ascending channel and bouncing off support. A test of the channel resistance at 1.1600 could be underway but there’s nearby resistance at the top of a longer-term range around 1.1450.
A break above the range resistance could push price on a stronger climb, especially with the week’s top-tier event risk coming up. On the other hand, if the range resistance holds, another test of the channel support at 1.1250 could be in the cards. A break below this level could spur a move towards the bottom of the longer-term range at 1.0500.
The 100 SMA is above the longer-term 200 SMA on the daily time frame, indicating that the path of least resistance is to the upside. In addition, this 100 SMA lines up with the range support, adding to its strength as a floor. Meanwhile, both RSI and stochastic are on middle ground, barely offering any strong directional clues at the moment.
The EU referendum is scheduled to start later today, which might mean some consolidation for this pair. The official results aren’t set to be announced until early Friday but private exit polls might give some clues on how the vote might turn out.
If a Brexit does occur, EURUSD could be in for declines due to an increased amount of uncertainty in the European region. In addition, traders might be wary of additional ECB easing if the UK exits the EU. On the other hand, a vote to stay could spur a relief rally for EURUSD as this would keep the status quo in place.
Euro zone PMI readings are also up for release today. Small declines are expected for the manufacturing and services sectors of Germany and France, with weaker than expected readings likely to weigh on the euro. Should the actual results come in better than expected, though, the euro could gain some support.
By Kate Curtis from Trader’s Way