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After trading on Friday, the Euro closed with some nice growth against the greenback. The price consolidated within a narrow range around 1.1108 during the Asian session. As trading opened in Europe, the rally continued. By the time of the US session, Euro-bulls had returned the rate to 1.1172. New York trading brought it up to 1.212.
While political tensions in the US have eased slightly, the general sentiment around the dollar remains the same. Its slide could be triggered by commodity currencies, who have strengthened on the back of rising oil prices.
Brent oil futures for July 2017 on the London ICE have risen by 2.09% to 53.61 USD per barrel, and on the WTI by 2.03% to 49.66 USD per barrel. In the space of a week, they’ve grown by 5.5% to 53.66 USD per barrel. Oil quotes rose without any large bounces on the expectation that OPEC will extend their agreement by 9 months to reduce oil production on the 25th of May.
FOMC member James Bullard added fuel to the fire when he cast doubt on the feasibility of an interest rate hike taking place in June, noting the economic slowdown that took place in the first half of this year as well as the fact that the labour market has been in decline since the Federal Reserve’s most recent meeting.
Market expectations:
In Asia, the Euro is trading down. Despite the sharp rise in oil prices, commodity currencies haven’t followed suit. Gold and yen are falling. On Friday, the 19th of May, according to CME Group’s FedWatch, the probability of a rate hike in June had risen from 73.8% to 78.5%, in July from 75.8% to 80.0% and in September from 82.4% to 86.1%.
Looking around, I can’t see any indications of further growth for the Euro. Looking at technical factors and the Euro index, the road to 1.13 is open for Euro-bulls. Given that the Euro closed up on Friday, I’m expecting today’s movements to go against that, as is my general rule. Quotes should fall to the trend line. So as to avoid risky sales, I think it’s better to avoid trading today, as there are no clearly defined sell signals and the profit/risk ratio is low.
