EUR/USD: May be destined for higher Dec valuations if risk eases

I remains of the view that the EURUSD is setting the stage for higher valuations in December based on various factors, such as the completion of 3 legs down (each weaker in magnitude) , a major divergence vs German-US yield spread/Italian premium, and a bullish outside day at decision level 1.13. Capitalizing on weakness does make sense sub 1.13. In the last 24h, the bearish reversal does suggest that another attempt down towards the round number is on the cards. Any test of liquidity areas at 1.1285 and beyond do represent genuine long opportunities based on valuations.

From an hourly perspective, the impulsive move from levels above 1.14 has set into motion a potential downward extension to retest 1.1319 liquidity area ahead of the critical 1.13. The increase in sell-side volume on the way down backs the case for lower levels. The sharp pullback has also invalidated the hourly upcycle as the price discovery matures into a potential intraday downcycle. However, I am still expecting plenty of buying interest, especially if risk off can ease. A major demand area (highlighted in green), the deteriorating outlook for US rate hikes heading into 2019, higher valuations, all support the notion that sub 1.13 should represent genuine value to engage in buy-side campaigns if risk permits.