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On Monday, the Euro closed up against the US dollar for the second session in a row. Since the 11th of May, the single currency has appreciated by 3.76% or 408 pips. It’s been updating its highs for 7 days, just like the bitcoin.
The EUR/GBP cross is in unison with buyers, so sellers are struggling to break out of this upwards movement. Market participants are only paying attention to information that moves the rate in the direction of the trend and not against it.
The primary driver behind yesterday’s rally was German chancellor Angela Merkel’s comment that the Euro was too weak due to the ECB’s soft monetary policy. There was nothing new about her comments, but traders decided to make a big deal of it. They began to speculate that Germany, through its ECB representatives, will insist on a tightening of their stance on monetary policy this year. The Bundesbank’s monthly report also came into focus.
The EUR/GBP cross has grown amidst the panic surrounding Brexit talks. The UK could walk away from talks if the EU continues to insist on a divorce payment of 100bn EUR.
Partial profit-taking from investors as well as statements from FOMC members regarding interest rates put pressure on the cross. This pushed the Euro against the dollar down from 1.1263 to 1.1229.
Market expectations:
In Asia, the Euro is trading at 1.1252. The closest resistance on the EUR/USD pair is 1.1330 and on the EUR/GBP at 0.8689. Should these levels be reached, it’s worth expecting a downwards correction. If a major seller doesn’t appear at this point, then the Euro could continue to the next resistance zone at 1.1480/1.1500 (line drawn through the maxima 1.1714 from 25/04/15 and 1.1616 from 03/05/16).
Day’s news (GMT+3):
- 09:00 Switzerland: trade balance (Apr);
- 09:00 Germany: GDP (Q1);
- 10:30 Germany: Markit services PMI (May);
- 10:55 Germany: Markit manufacturing PMI (May);
- 11:00 Germany: IFO business climate;
- 11:00 Eurozone: Markit services PMI (May);
- 11:30 UK: public sector net borrowing (Apr);
- 13:00 UK: inflation report hearings, CBI distributive trades survey (May);
- 15:30 Canada: wholesale sales (Mar);
- 16:45 USA: Markit manufacturing PMI (May), Markit services PMI (May);
- 17:00 USA: new home sales (Apr), Richmond Fed manufacturing index (May).
