On Monday the 1st of July, trading on the EURUSD pair closed down. The meeting between the presidents of the US and China reduced tensions between the two countries, but this boosted the dollar rather than the euro. The G20 summit lowered expectations of a rate slash by the US Fed this year.
The two heads of state agreed to renewed trade talks. The US will not impose any new tariffs on China and will ease restrictions on Huawei. China is set to increase imports of agricultural produce from the US.
In the US session, the dollar was boosted by economic data. The manufacturing PMI came out slightly better than expected at 51.7 points. The EURUSD pair subsequently slid to 1.1281.
Day’s news (GMT 3):
- 11:30 UK: Markit construction PMI (Jun).
- 12:00 Eurozone: PPI (May).
- 17:05 UK: BoE Governor Mark Carney’s speech.
- 22:30 US: total vehicle sales (Jun).
- 23:30 US: API weekly crude oil stock (28 Jun).
Bullish sentiment remained on the dollar yesterday, so attempts by the euro bulls to push above the 67th degree were unsuccessful. The pair dropped to the 112-135 degree range. At the time of writing, the euro is trading at 1.1292.
I’m expecting a fresh low today, with a target of 1.1252 (135th degree). To get an upwards correction, it should be enough to revisit the 1.1275 low. There’s a slight bullish divergence between the rate and the AO indicator, but since the stochastic is in the sell zone, the bears will once again try to move downwards.
In order for the bulls to reverse the situation, they need to push the rate up to the balance line and bring it back into the channel. There’s an intermediate support at 1.1270.