EURUSD: bulls trying to develop the upwards correction
On Monday the 21st of May, trading on the euro closed up. At the beginning of the European session, the single currency dropped to 1.1717 before rebounding. The euro initially rose against the dollar to 1.1779 and climbed further to 1.1796 during the US session.
The euro fluctuated on the back of political uncertainty in Italy. The League and Five Star Movement have put forward a candidate for the post of Prime Minister of Italy, who now awaits confirmation from the president.
In the US session, the euro’s rise was facilitated by an easing of tensions between the US and China as well as a decline in US10Y bond yields. I’d like to point out that there is again a negative correlation between the EURUSD pair and US10Y bond yields.
US Secretary of the Treasury Steven Mnuchin said yesterday that the trade war between the US and China has been put on hold for the time being.
Day’s news (GMT+3):
- 11:30 UK: public sector net borrowing (Apr).
- 12:00 UK: inflation report hearings.
- 13:00 UK: CBI industrial trends survey – orders (May).
- 15:30 Canada: wholesale sales (Mar).
- 17:00 USA: Richmond Fed manufacturing index (May).
Sellers moved with the trend to bring the price to 1.1717 on the back of a rising dollar and political uncertainty in Italy. My fears of a rebound upon reaching the 1.1740 support were not unfounded.
Once again, this rebound was brought about by developments in the news. Since our pair was ready for this, positive news from Italy gave rise to a sharp surge in quotes.
This growth petered out around the upper boundary of the A-A channel and the 67th degree. After a rebound on the daily timeframe, a pin bar or hammer was formed. Since the US and China have pressed the pause button on their trade dispute, it’s worth considering the continuation of the upwards correction past 1.18.
Also, considering that the greenback is showing mixed dynamics, and that all the euro crosses are trading down, today I’m forecasting a drop along with the trend to 1.1750 followed by an upwards reversal. However, I wouldn’t advise rushing to buy against the trend at 45 degrees. The trend hasn’t been broken and the bears could yet cancel the pin bar model. In keeping with the trend, the price could return to yesterday’s low from which another rebound is likely.