Day’s news (GMT 3):
- 10:30 Eurozone: ECB’s President Lagarde speech.
- 15:30 Canada: building permits (Apr).
- 23:30 US: API weekly crude oil stock (22 May).
Yesterday’s expectations of a decline were met in full. The euro-bulls easily broke through 1.0950 with some help from the crosses. Growth slowed down around the 112th degree, which intersected with the upper line of the Andrews pitchfork.
In the Asian session, the majors are trading slightly down. The euro is losing ground on the crosses, which is a negative sign for our main pair. To continue upwards, we need to see a three-wave structure. The smaller the correction from 1.0996, the higher the probability of breaking through 1.10. If you look at the monthly time frame, then 1.10 doesn’t pose a threat to the bulls, who have been ready to break through it for a while from a technical standpoint. Still, the ongoing pandemic is limiting their activity.
Today, we expect to see a downwards correction to the trend line (1.0947), followed by a rise to 1.0990. 1.0947 marks the 50% Fibo level of the growth from 1.0871 to 1.0996. The 112th degree is at 1.0943 around where the trend line is. By 16:00 EET, it should coincide with the balance line, which currently runs through 1.0930.
We reckon that the best case scenario will see growth recommence from 1.0943-47. S&P 500 futures are trading up, but the euro crosses are all looking down. As such, there’s no hurry to enter long positions. If the LB line doesn’t hold up, the drop might be intensified by technical factors. Lagarde’s speech today could sink the euro.