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The Euro/dollar pair closed Tuesday’s trading down. Sellers managed to almost completely erase Monday’s gains (engulfing the body of the candlestick). A rise in US bond yields in response to increased probability of the Fed tightening their monetary policy in June acted as a catalyst for the US dollar’s growth.
On Tuesday, the 23rd of May, according to CME Group’s FedWatch, the probability of interest rates going up in June has risen from 78.5% to 83.1%, in July from 79.5% to 84.4% and in September from 86.3% to 88.6%.
The dollar was also bolstered by the release of the proposed budget for the 2018 fiscal year as well as hearings in Congress regarding Donald Trump’s Russia ties. A White House representative stated that the hearings in Congress confirm that there were no ties between Russia and Trump’s election campaign. Remember that it was the threat of impeachment that caused the EUR/USD pair to surge to 1.1268.
US statistics:
The Markit manufacturing PMI from the US in May fell to 52.3 (forecast: 53.0, previous reading: 52.8). The Markit services PMI grew to 54.0 (forecast: 53.1, previous reading: 53.1).
The number of new home sales in the US in April fell to 569,000 (forecast: 610,000, previous reading revised from 621,000 to 642,000).
Market expectations:
During the US session on Tuesday, the trend line was broken through. The Euro fell to 1.1175. Sellers now need to consolidate below the 1.1161 low in order to trigger a mass closing of long positions on the Euro, which were opened from 1.0839. Clearly, the profit-taking has already begun, but the current decline isn’t enough to form a trend.
There are a couple of positive signs for sellers. On the daily timeframe, a pin-bar has formed on the EUR/GBP cross. This is emitting a sell signal for the Euro, which was started in Asia as the cross fell below 0.8619 (yesterday’s low). The immediate target on the cross is 0.8575. A fall for the cross means the same for our main currency pair.
