Dollar Risks Deeper Pull Back After Data Miss, Euro to Regain Strength
There are a couple of developments to note in the forex markets last week. Firstly, Dollar ended as the strongest major currencies as markets firmed up the expectation of a June hike by Fed. However, the greenback tumbled sharply against Euro and Swiss Franc before the close after weaker than expected inflation data. The dollar index was rejected from 55 days EMA and closed lower at 99.19. That was also accompanied by steep decline in 10-year yield which closed at 2.335. The overall development suggests that the greenback would turn weaker against Euro again as the post French election pull back ends.
EUR/USD Weekly Outlook
EUR/USD dipped to 1.0838 last week but rebounded strongly since then. Initial bias is neutral this week first. Overall, near term outlook is unchanged. Choppy rise from 1.0339 is seen as a corrective move. Bearish divergence condition in 4 hour MACD suggests short term topping at 1.1020 already. Hence, we'd favoring another fall. Break of 1.0838 will turn bias to the downside for 55 days EMA (now at 1.0770). Break there will argue that the corrective rise from 1.0339 is completed and target 1.0569 support for confirmation. Break of 1.1020 will extend the rise but we'll look for reversal signal again.
In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate long term reversal.
In the long term picture, the down trend from 1.6039 (2008 high) is still in progress and there is no clear sign of completion. We'd expect more downside towards 0.8223 (2000 low) as long as 1.1298 resistance holds. However, firm break of 1.1298 should now confirm long term reversal.
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***Information contained in this news letter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information being made available as per the events occurring in the financial markets.
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