EUR/USD - So far has retraced only 23.6% of 32-month sell-off


The EUR/USD pair may appear overbought in the short-run, courtesy of the rally from the low of 1.0341 (Jan low) to 1.1212 (Friday’s high), although when viewed on larger time frames, the rally appears more like a corrective move.

So far, the pair has only retraced 23.6% (1.1202) of the drop from 1.3994 (May 2014 high) to 1.0341 (Jan 2017 low).

Focus on Fed speak

Minneapolis Fed President Neel Kashkari, Philadelphia Fed President Patrick Harker, Federal Reserve Governor Lael Brainard and Chicago Fed President Charles Evans will make public appearances today.

The CME Group FedWatch's odds of a June rate hike rise, which have increased to 78.5% from the last week’s low of 64%, could scale new heights if the policymakers reiterate the potential for two more rate hikes this year and talk about balance sheet normalization. Hawkish talk could help strengthen the bid tone around the US dollar.

Moreover, markets are not buying dovish sound bites anymore. This is evident from the recovery in the rate rise odds even though St Louis Federal Reserve president James Bullard on Friday called Fed’s projected path for interest rates as overly aggressive.

EUR traders eye German Bundesbank (BUBA) monthly report

The data released in Germany and across the Eurozone has been very strong... So strong that analysts have started questioning whether the UK is leaving the sinking ship (Brexit) or a luxury cruise ship.

The BUBA report is more likely to sound upbeat and in favour of higher rates/QE taper thus leading to more gains in the EUR pair.

The Chicago Fed National Activity index could go unnoticed unless the actual figure significantly deviates from the consensus estimates.

EUR/USD Technical Levels

The spot closed above 1.1202 (23.6% Fib R of 1.3994-1.0341) on Friday and traded around 1.1190 in Asia. A move back above 1.1202 would open doors for 1.1299 (Nov 2016 high) and 1.1327 (Sep 2016 high).

On the lower side, breakdown of support at 1.1123 (Sep 2016 low) could yield a pullback to 1.1075 (May 18 low) and 1.10 (zero levels).

The daily RSI is turning lower from the overbought region, but is perfectly aligned for a break above 50.00 levels.

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bullish Neutral Shrinking
1H Bearish Neutral Low
4H Slightly Bullish Overbought Expanding
1D Slightly Bullish Overbought Expanding
1W Bullish Overbought Expanding

 

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