The euro's technical tone indicates a bearish divergence as technical indicators are moving lower even though at mid-week the euro made a marginal new high, explains the analysis team at BBH.
“The five and 20-day moving averages crossed for the first time in nearly two months. Our lingering concern is that interest rate differentials, at the two- and ten-year spread has moved to the US. Arguably it is a function of disappointing US economic data (less consumption, subsiding price pressures, fewer inventories), and a backing up of eurozone interest rates, especially in Germany. A break of $1.1110 is needed to signal the morphing of the broadly sideways consolidation to an outright correction. On the upside, a move above the $1.1220 area may be seen as an early signal of a running start at the $1.13 cap.”
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