EUR/USD: Break sub 1.1350 allows retest of 1.13 key support

Cycles & Levels: We are just 24h away from the close of the weekly candle, and as of now, the bearish reversal formation is troublesome for the interest of buyers as the prospects build for an eventual re-test of 1.13 support even before making it to the midpoint of a projected 1.13-1.18 range at 1.1550 (not good news for longs). The sell-off in the daily is in line with the developing downcycle at play. On the hourly, where we can more clearly break down the latest dynamics, we’ve now reached a normal distribution projection, which happens to coincide with a confluent support level. We could see a rebound off this area even if as the order flow stands, it is not conducive of a substantial recovery at this stage.

Correlations & Volumes: There are more positives than negatives for the interest of sellers. Firstly, the candle has closed at the very lows of the day. Secondly, the POC is now trapped on the upside. Thirdly, there has been a slight downtick in German vs Italian yield spreads, not enough to justify a lower Euro given the recent recovery, but at the same time, the German vs US yield spread continues to make marginal new lows, which adds pressure as capital flows are drawn into the allure of the US as a destination paying higher returns for investors. The consolation for sellers is that the bearish candle does not carry a whole lot of volume, even if that gets overruled by the rest of the factors mentioned.