- The EUR/USD continues its upward march, topping 1.1800 and reaching the highest in over two weeks.
- The pair rides higher on ECB expectations and an upbeat mood while ignoring the data.
- The technical picture is slightly positive, apart from the “death cross.”
The EUR/USD is rising for the fourth consecutive day, topping 1.1800. The pair advanced over 300 pips since hitting a 10-month low on May 29th. There have been no new significant developments but the previous themes continue pushing the pair higher.
In the old continent, expectations from the ECB remain high. Members of the Governing Council have confirmed that the Frankfurt-based institution will discuss the exit from the QE program in its June 14th meeting. Praet, Knot, and Hansson all conveyed the message on Wednesday, following up on a Bloomberg report on Tuesday.
So far, the Bank seemed to procrastinate on taking such a decision. However, recent inflation figures and perhaps the new forecasts that accompany the June meeting drove the ECB to prepare markets for an announcement. Markets expect a reduction of the program on after September with a complete end to bond-buying by the end of the year. A rate hike is now expected in mid-2019.
The second upwards driver for the pair comes from the other side of the Atlantic. The market mood remains upbeat, and this weighs on safe-haven assets. The Japanese Yen is the primary loser, but the US Dollar follows suit. Stock markets are on the rise and trade concerns are shrugged off.
And these concerns are real. Trump is picking a fight on three fronts, with the EU, China, and its North American partners. The G-7 Summit is expected to see the US in isolation against all the others. Will markets eventually realize this is a risk to global growth?
Markets are also shrugging off data that is euro-negative. German Factory Orders dropped by 2.5%, far worse than an increase that was expected. Earlier in the week, the US ISM Non-Manufacturing PMI beat expectations, but markets just ignored it.
Later in the day, the US publishes weekly Jobless Claims and Consumer Credit. This is unlikely to change rock markets. ECB expectations and trade concerns will likely top the agenda.
EUR/USD Technical Analysis – OK except the death cross
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The EUR/USD is finally enjoying some upside momentum for the first time since mid-April. Also, the RSI turned positive, topping 50. The pair remains well below the 50-day Simple Moving Average and the 200-day SMA.
Both SMAs are around 1.2010, and more importantly, they are about to cross. The imminent drop of the 50-day SMA below the 200-day SMA is a pattern known as the “death cross.” As the name implies, the pattern indicates a downfall. Does this mark the end of the correction? We will know soon enough.
At the time of writing, the pair is battling the 1.1830 level which was a peak in mid-May. Looking up, the January low of 1.1915 is the next hurdle. The round number of 1.2000 is of high psychological importance, and it is backed up by the SMAs mentioned earlier. Further up, 1.2050 was a stepping stone on the way down.
On the downside, we find the initial low of 1.1767 as the first line of support. It is followed by 1.1725 which was a swing low on the way down and capped a recovery attempt later on. Lower, 1.1648 was the May 25th trough.
If the pair continues higher, the Confluence Detector shows another target. EUR/USD targets 1.1870 after the big breakout “” Confluence Detector
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