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May 24th, euro strengthened against the backdrop of declining yields on US bonds

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notesfortrader
@notesfortrader
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By the end of the week, major currencies showed gains, except for the Australian and New Zealand dollars. The largest gain against the US dollar was shown by the Swiss franc (+ 0.39%). The Japanese yen rose in price by 0.40%, the pound - by 0.37%, the euro - by 0.30%, the Canadian dollar - by 0.29%. The New Zealand dollar lost 1.16% and the Australian dollar - 0.70%.

On Friday, May 21, the euro fell 0.38% to 1.2181. The pair declined with significant reasons left. That the dollar rose on the back of a strong manufacturing PMI is not a convincing reason. On one good American statistics, news agencies interpret it as the main reason for the increase in demand for risky assets, the other - as a factor for strengthening the dollar due to the recovery of the US economy. This face is invisible. As beneficial to the media, they interpret statistics to keep the crowd in the right direction for their sponsors.

Scheduled statistics (GMT +3):

  • 16:30 the US is to release the index of economic activity from the Federal Reserve Bank of Chicago for April.
  • 17:30 in the UK, the Governor of the Bank of England Andrew Bailey, Deputy Governor of the Bank of England for Financial Stability John Cunliffe, members of the ILC of the Bank of England Andy Haldane and Michael Saunders will speak.
  • 19:00 FOMC member Rafael Bostic will give a speech at .

Current situation:

During the Asian session, the euro rose to 1.2195. The euro strengthening phase began with a drop in Treasury bond yields (US10Y). The active phase of growth in cycles falls on Wednesday. On Wednesday, the RBZN meeting may act as a trigger for the dollar's weakening.

The US10Y yield is a key factor for the euro / dollar pair. If it falls to 1.59% from 1.62%, we are waiting for the renewal of the maximum in the euro / dollar pair. The cross with the euro is now on the side of buyers. When moving to the north, the resistances are: 1.2200 (sma55), 1.2215 (3) and 1.2230 (2). Support is the level 1.2163. To neutralize the bearish double top pattern on the hourly chart, you need a two-day flat in the 1.2160 -1.2200 range.

This week, from the news, several reports can be distinguished: changes in GDP in Germany and the United States for the 1st quarter, PMIs in Germany from IFO, as well as an indicator of consumer confidence in the United States.

Summary: in trading in Asia, the euro recovered its losses on the back of rising yields on US bonds. The general background for buyers remains positive. When moving to the north, the resistances are: 1.2200 (sma55), 1.2215 (3) and 1.2230 (2).

On Friday, a “double top” pattern was formed at the hourly TF. To level it, you need a flat in the range of 1.2160 -1.2200 for about 18-36 hours. This will allow the market to open indicators and prepare for the rally.

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