Trading on the euro/dollar pair closed up on Thursday. Despite a downwards correction to 1.1388, the euro-bulls bought up the single currency while it was weakening. Buyers believed in a tightening of monetary policy and didn’t take the ECB’s comments seriously that Mario Draghi’s speech concerning the stimulus program had been misinterpreted.
US 10Y bond yields are rising in tandem with their German counterpart. German bond yields are growing significantly faster than they are supporting the euro and dollar.
Markets ignored the upwards revised US GDP figures for the first quarter. This was the third reading. It’s not having much of an effect on markets given that the second quarter comes to an end today.
Day’s news (GMT 3):
- 09:00 Germany: retail sales (May);
- 10:00 Switzerland: KOF leading indicator (Jun);
- 10:55 Germany: unemployment change (Jun);
- 11:30 UK: current account (Q1), GDP (Q1), total business investment (Q1), index of services (Apr);
- 12:00 Eurozone: CPI (Jun), CPI core (Jun);
- 15:30 Canada: GDP (Apr), raw material price index (May), industrial product price index (May);
- 15:30 USA: CPI core (May), personal spending (May), personal income (May);
- 16:45 USA: Chicago PMI (Jun);
- 17:00 USA: Michigan consumer sentiment index (Jun);
- 17:30 Canada: Bank of Canada business outlook survey.
EURUSD rate on the hourly. Source: TradingView.
The euro/dollar reached the 1.1445/1.1475 resistance range on Thursday. The pair traded below 1.1445 for several hours. The ending triangle is in its final stages, but this doesn’t mean that a new dollar rally will start from exactly here. Yes, there is a downwards correction, but what will it look like in terms amplitude, motion and duration? Buyers believe in themselves.
As the price approaches 1.1470, the more people will be willing to sell their euros. As a result, it will be easier to go beyond this level. The price has been in a sideways trend for the last 12 hours. The bulls are strong and will try to launch an assault on 1.1465/70 as markets open.
If buyers get spooked by the ending triangle, there’s a risk of the price going straight down. I reckon that if the euro falls below 1.1425, it could trigger a partial closing of long positions by buyers. They can buy euros from 1.1392 and 1.1365 levels. In my opinion, a slide for the euro as far as 1.1365 would signal a reversal for the euro and a full retreat from the resistance zone of 1.1445/1.1475.
If we see growth to 1.1465, I expect a rebound to 1.14 in the US session. If the euro/dollar goes down immediately from its current level, I expect a slide to 1.13880. If the day closes down, the correction will last another two days; Monday and Tuesday.