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Trading on the Euro again closed up on Tuesday. The pair extended its rally to grow by around 100 pips to 1.1097. Increased demand for the single currency was brought about by a slide in US bond yields, a general weakening of the dollar and the collapse of the resistance range from 1.1000 to 1.1022.
Due to the slide in bond yields, the probability of an interest rate hike in June has fallen. CME Group’s FedWatch has downgraded the probability of a rate hike in June from 73.8% to 69.2%, in July from 76.4% to 61.2% and in September from 82.9% to 80.9%.
The economic data coming out of the US is mixed. While industrial production for April exceeded expectations, the number of housing starts was lower than the forecast.
US statistics:
The number of housing starts in the US in April fell by 2.6% to 1.17 million houses (forecast: 3.7% to 1.26 million, previous reading: -6.6% to 1.203 million).
Industrial production rose by 1% in April (forecast: 0.4%, previous reading revised from 0.5% to 0.4%).
Market expectations:
In today’s Asian session, Euro-bulls continue their rally, which started on the 12th of May. The Euro/dollar gathered pace, broke the resistance at 1.0935 and the Euro index grew to 101.16. Now, the Euro is trading at 1.1104 and the Euro index is at 102.06. The closest resistance for the index is at 102.93 level, and the closest resistance for the Euro is at 1.1130 (61.8% of the downwards movement from 1.1616 to 1.0340). If the EUR/GBP cross strengthens past the 0.8600 mark, then the EUR/USD won’t stay at its current level.
The Euro is in a turbulent place at the moment, so I’m not making any predictions today. The time for drawing conclusions will be after the first wave of profit taking. There are no precursors for a reversal on the hourly timeframe apart from the fact that the price has reached the upper boundary of the U3 Moving Averages channel.
Day’s news (GMT+3):
- 07:30 Japan: industrial production (Mar);
- 11:30 UK: average earnings (Mar), claimant count change (Apr), ILO unemployment rate (Mar);
- 12:00 Eurozone: CPI (Apr), CPI core (Apr);
- 15:30 Canada: manufacturing shipments (Mar);
- 17:30 USA: EIA crude oil stocks change (12 May).
