For the first time in months, the EUR/USD is threatening to test a key simple moving average (SMA) on the weekly chart. It may not sound like much, but rates have held north of this indicator since the first week of June. Are we seeing the initial stages of a pullback or full-blown correction in the EUR/USD? Right now, it’s too early to tell. However, rates are off almost 100 pips to open the week.

One of the key stories in today’s news cycle is the resurgence of COVID-19 in the United Kingdom. More than 4000 new cases were discovered in the past 24 hours, reinforcing the upward trajectory of infections for September. At press time (about 1:45 PM EST), reports are being circulated that the contagion is exploding. According to Chief Scientific Advisor Sir Patrick Vallance, 50,000 new cases per day by mid-October is possible. When taken with the evolving E.U./U.K. Brexit standoff, there is considerable pressure on Eurozone currencies.

Let’s dig into the weekly technicals for the EUR/USD and see where this pair stands.

Moving Average In View For The EUR/USD

On the weekly chart, the EUR/USD has posted back-to-back Doji candlestick formations. This is a somewhat rare event and one that signals extreme market consolidation.

Here are the key levels to watch until Friday’s closing bell:

• Resistance(1): Psyche Level, 1.2000 
• Support(1): Weekly SMA, 1.1682
• Support(2): 38% Retracement, 1.1485

Bottom Line: Until we see the EUR/USD test the waters beneath the 38% Retracement, a bullish bias remains warranted. However, a nice short-term buying opportunity may develop from the Weekly SMA.

For the remainder of the week, I’ll have buy orders queued up from 1.1686. With an initial stop loss at 1.1646, this trade produces 40 pips on a standard 1:1 risk vs reward ratio.