EURUSD Trying For Break-Out Counter-Rally now
Using DXY as the confirming signal (please see DXY updates)
we've been short EURUSD for some time now, looking for a
test of 94.20 on DXY as the likely medium term top for Dollar
strength across the pairs. That came yesterday (too busy
shorting Bitcoin to notice, sorry for that).
But EUR didn't quite make it to the next downside target at
1.1665 here, bouncing away 11 pips higher than really
expected, though it did bounce precisely off the lower
parallel of the little pattern EUR is now trapped within.
Yesterday was mostly bear closing by look of the chart. Today
it's more bull buying with a small impulse candle arriving as
London opened after an aimless overnight session in far East.
It can rally to 1.1756 and then will probably need impetus and
follow through from New York to push any higher still.
Only once it can get above here should it push back up to the
1.1823 level, presnting a potential long opportunity if we see
it develop later. But until we see that evidence present itself
EUR is becoming vulnerable to another sell off, though this
time it should only come back to the 1.1721 line to begin with
and will need US selling to drive it lower still towards the
1.1679-1.1665 range.
With the Dollar expected to enter an extended period of
consolidation under 94.2 on DXY it's no longer appropriate to
be looking for big EUR weakness in the nearterm.
However, looking a little further out in time, DXY is expected
to rally a further 1% or so from 94.2 to 95.15 and EUR to fall
back to 1.1558 eventually before any real change in overall
trend is likely on this pair.
This update was posted shortly after the DXY companion forecast this morning. It never loaded correctly. Very annoying. Anyway, what was expected above is happening pretty much as it should so far - EUR is about to break higher as DXY unravels under the dynamic from the highs a while longer.