EURUSD Trades Into Supply Zone, Following Bund & DXY Collapse
This is not the first time the euro-dollar has been able to stage monster rallies, as faith in the US dollar continues to crumble. The dollar index has had a few of the worst days since 2009.
Previously via Twitter, I supported the initial rally from 1.0880; but as it approached the current supply zone, I believed it would be a tough nut to crack for further gains.
After rejection of the supply resistance at 1.14629 and began to falter, I warned that the pair could fall to 1.1033. It actually fell through that to 1.08208. The pair recovered quickly on a few factors:
The US economic data has been absolutely horrendous. Both retail sales and consumer prices are rolling over on a quarterly basis and mirroring the decline of the "Great Recession." Inventories are at an all-time high, with the sales-to-inventory ratio spiking to recession levels. It's always taking a recession to restore the balance. Jobless claims have only been tracking the labor participation rate lower because one cannot receive unemployment benefits unless one is actively looking for a job.
New orders and manufacturing have been doping at an alarming rate, and layoffs in the energy sector are staggering. Even more concerning is the financial sector is threatening to cut thousands of jobs, including JP Morgan and HSBC. US Bancrop's CEO said that if the Federal Reserve does not raise rates soon jobs will be terminated.
And the Fed is highly unlikely to raise rates, which is bearish for the dollar and bullish long-term for the euro. Futhermore, the general consensus with traders is that Greece will get a deal done. I am not sure how likely that is, which could cause a problem for the euro near-term.
The absolute collapse of the bund is driving the euro higher without doubt. Just as of April, the German bund reached a low of only 5 bps, or .05 percent. Today, it has ballooned to 91 bps, or .91 percent. While still under one percent, that in itself is nothing to worry about. However, like with the DXY rise, it is the rate of speed that is alarming.
During yesterday's ECB press conference, President Mario Draghi said to expect more market volatility yet not to expect the central bank to contain it.
The trend on EURUSD is up as it is making a series of higher lows and, potentially, higher highs. The supply zone resistance will be the key price point to watch. Moreover, if price action lingers within the supply zone without a bullish catalyst, expect the pair to retrace.
Look for daily support at 1.1255 and 1.1033. Traders make look to consolidate on profit taking since the pair is up several hundred pips in seven trading days.
If price action can close (also wait for confirmation) above the supply zone, upside targets can be found at 1.1655 (currently budding against the 200-day EMA) and 1.1862.
A few supporting tweets:
twitter.com/Lemieux_...s/598477110542491649
twitter.com/Lemieux_...s/599272779406512128
twitter.com/Lemieux_...s/599272400040173569 (original attempt in supply zone)
Feel free to contact me or check out my work:
Twitter: lemieux_26
Bullion.Directory: bullion.directory/ab...christopher-lemieux/
Previously via Twitter, I supported the initial rally from 1.0880; but as it approached the current supply zone, I believed it would be a tough nut to crack for further gains.
After rejection of the supply resistance at 1.14629 and began to falter, I warned that the pair could fall to 1.1033. It actually fell through that to 1.08208. The pair recovered quickly on a few factors:
The US economic data has been absolutely horrendous. Both retail sales and consumer prices are rolling over on a quarterly basis and mirroring the decline of the "Great Recession." Inventories are at an all-time high, with the sales-to-inventory ratio spiking to recession levels. It's always taking a recession to restore the balance. Jobless claims have only been tracking the labor participation rate lower because one cannot receive unemployment benefits unless one is actively looking for a job.
New orders and manufacturing have been doping at an alarming rate, and layoffs in the energy sector are staggering. Even more concerning is the financial sector is threatening to cut thousands of jobs, including JP Morgan and HSBC. US Bancrop's CEO said that if the Federal Reserve does not raise rates soon jobs will be terminated.
And the Fed is highly unlikely to raise rates, which is bearish for the dollar and bullish long-term for the euro. Futhermore, the general consensus with traders is that Greece will get a deal done. I am not sure how likely that is, which could cause a problem for the euro near-term.
The absolute collapse of the bund is driving the euro higher without doubt. Just as of April, the German bund reached a low of only 5 bps, or .05 percent. Today, it has ballooned to 91 bps, or .91 percent. While still under one percent, that in itself is nothing to worry about. However, like with the DXY rise, it is the rate of speed that is alarming.
During yesterday's ECB press conference, President Mario Draghi said to expect more market volatility yet not to expect the central bank to contain it.
The trend on EURUSD is up as it is making a series of higher lows and, potentially, higher highs. The supply zone resistance will be the key price point to watch. Moreover, if price action lingers within the supply zone without a bullish catalyst, expect the pair to retrace.
Look for daily support at 1.1255 and 1.1033. Traders make look to consolidate on profit taking since the pair is up several hundred pips in seven trading days.
If price action can close (also wait for confirmation) above the supply zone, upside targets can be found at 1.1655 (currently budding against the 200-day EMA) and 1.1862.
A few supporting tweets:
twitter.com/Lemieux_...s/598477110542491649
twitter.com/Lemieux_...s/599272779406512128
twitter.com/Lemieux_...s/599272400040173569 (original attempt in supply zone)
Feel free to contact me or check out my work:
Twitter: lemieux_26
Bullion.Directory: bullion.directory/ab...christopher-lemieux/