The EUR/USD looks set to move higher, but some hurdles remain.
The EUR/USD has been moving higher for the better part of the day, but as we are approaching the start of the U.S. trading session, most of the gains made in London morning trading have been given back. There is no point in taking excessive risks, until we see some levels broken.
After weeks of range bound trading we feel like the EUR/USD could test the upside and break new highs in the aftermath of the chairman Yellen's testimony which revealed that the Federal Reserve is not in a rush to raise rates any time in the near future.
We are seeing the euro strengthening somewhat in light of the concessions achieved between the Eurogroup and Greece late last week. As the price of the EUR/USD is currently hovering just below 1.1350, we would be looking at future price action to determine the direction of the pair.
Should the EUR/USD fail to test 1.1390 in the near future, we might see another retracement lower again, but that will only happen in case we see a shift in the fundamental landscape. Currently the U.S. dollar is still supported, but in our views, it has rallied a touch more than its fair value somewhat faster than expected.
We could see the EUR/USD going higher somewhat in the near future, if the Federal Reserve does not commit to rate hikes before autumn. For now the message which Janet Yellen sent yesterday was of no change in expectations.
Cold weather is again playing games with the U.S. economy, and the EUR/USD can get affected. But let's focus on the day ahead now - we would be buying daily calls on the EUR/USD if the price gets to 1.1370 again. Otherwise, if we see a return to below 1.1300, we will begin considering a move lower.