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EURUSD: US Independence Day could bring volatility

Previous:

On Tuesday the 2nd of July, trading on the euro closed down. Germany's political crisis coupled with the overall strengthening of the dollar put pressure on the pair.

US economic activity indices exceeded expectations. Against the backdrop of positive statistics, US 10-year Treasury yields rose to 2.870%. After dipping to 1.1591, the euro recovered to 1.1648. By this time we had already seen a technical correction following the close of the European session.

US data:

The ISM manufacturing PMI in June hit 60.2 (forecast: 58.4, previous: 58.7).

The Markit manufacturing PMI in June rose to 55.4 (forecast: 54.8, previous: 54.3).

Day's news (GMT 3)

  • 11:30 UK: PMI construction (Jun), FPC meeting minutes.
  • 12:00 Eurozone: PPI (MoM) (May), retail sales (MoM) (May).
  • 17:00 US: factory orders (MoM) (May).
  • 19:00 Eurozone: ECB's Praet speech.

Fig 1. EURUSD hourly chart. Source: TradingView

Current situation:

Expectations concerning yesterday's decline on the euro were fully justified. Euro bears  broke the trend line and reached 67 degrees. The fall was quite hard.

From a minimum of 1.1591, the price recovered by 45 degrees. The euro is trading near the balance line (sma 55). Given that the market will close early in the US due to Independence Day (the 4th of July), volatility could rise by the evening.

During European trading, the price may recover to 1.1676 due to the crosses. If you're thinking about selling euros, then keep an eye on the resistance zone (H1.1721 and H1.1690). Movements on the crosses could lead to a breakout. The dollar is trading in positive territory against the Swiss franc and yen. This means that the demand for risky assets has increased. If buyers pass through the resistance of 1.1677, then they will open the way to 1.1745. The upper line of the channel is formed from the lows of 1.1508 and 1.1827. If the support of 1.1619 doesn't hold, then we'll move towards the lower boundary of the channel (1.1545).


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