On Monday the 19th of November, the euro strengthened against the US dollar to 1.1464. The main driver of this increase was the overall weakening of the US currency, caused by a drop in US 10-year bond yields, as well as an increase in the euro/pound cross-pair.
Day's news (GMT 3):
- 10:00 Germany: German PPI (YoY) (Oct).
- 11:20 Australia: RBA Governor Philip Lowe speaks.
- 14:00 UK: CBI industrial trends orders (Nov).
- 16:30 US: building permits (Oct), housing starts (Oct).
Fig 1. EURUSD hourly chart.
Expectations of a drop were not met. The price traded for quite some time under the 135th degree. The dollar's overall drop helped euro bulls go through the reversal zone (112-135) and get to the 157th degree.
There is a bearish divergence between the price and the AO indicator. The wave structure itself supposes a fresh all-time high. Buying in the final phase of the upward movement is risky. The fact is that the fall across the markets put pressure on risky instruments, and the yet received support.
Given that euro crosses are now trading in the red, a failed attempt at passing 1.1464 could provoke buyers to close longs, leading to a drop to 1.1411. Just be prepared for this scenario, as it seems likely to play out this way today.
There are two more negative factors for the euro:
- Italy's unapproved draft budget for 2019.
- Vice President Mike Pence's announcement that the US is preparing to double tariffs on China, and it is this factor in particular which is putting pressure on markets.
If the euro reaches the 180th degree, then we will be selling the euro again. You can substitute a stop order at 1.1438, although with this tactic there is the risk that the order gets activated and the price will continue the upwards trend. Therefore, it is better to sell against the trend at the 180th degree. If at the moment there was already a double divergence, then I wouldn't think twice about putting a sell stop order under 1.1438.