EURUSD Trades Into Supply Zone, Following Bund & DXY Collapse

FX:EURUSD   Euro / U.S. Dollar
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: (original attempt in supply zone )

Feel free to contact me or check out my work:
Twitter: lemieux_26

Hello, That's a lot of text to read, try short and sweet.
I try to give a little for everyone. Not everyone is technical, and I personally analyze fundamentals, trade technically so I include both. I try to keep it just a few hundred words. Just skip to the bottom is you want price levels :) Thanks for the comment!
+2 Reply
Cityfox CommoditiesTrader
Thank you..have a good day
+1 Reply
Thank you, you as well!
I'm shorting it also based upon this analysis of mine. Your support is equal to my target indeed.
+1 Reply
Yes, there are a few ways to play this. I think the only way it will clear the zone definitively is if the bund continues to fall (yields rise) and the dollar declines further.
+1 Reply
Yahia.Awes CommoditiesTrader
If 1.10 fails, 1.06?
I see 1.0820 being support. The euro has had these moves in the past, typically short squeezes.
+1 Reply
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