Is Euro: USD/EUR (EUR=X) rally on trade tensions sustainable?

Is Euro: USD/EUR (EUR=X)  rally on trade tensions sustainable?

Is Euro: USD/EUR (EUR=X) rally on trade tensions sustainable?

EUR/USD kept a cautious upward bias on Friday. After a slow start, the pair was propelled to the mid 1.12 area as US CPI data (slightly) missed market expectations. US-German interest rate differentials initially narrowed further, but this move was partially reversed at the end of the session even as uncertainty on the next steps in the US-China trade conflict persisted. EUR/USD closed the session at 1.1233 (from 1.1215). USD/JPY traded quiet resilient and finished at 109.95.

This morning, sentiment in Asia remains risk-off. China is still expected to take retaliatory action against last week’s US tariffs’ hike. Comments from US (and Chinese) officials this weekend suggest that the dispute probably will drag on for a while. Asian equites and US equity futures are losing further ground. US yields decline. The picture on FX markets is mixed. The yen gains a few ticks (USD/JPY 109.75 area). The yuan (USD/CNY 6.85) and the likes of the won (USD/KRW 1184) are enduring substantial losses. EUR/USD is trading little changed in the 1.1230 area.

There are no important EMU or US data today. So global FX trading will be sentiment driven as investors are awaiting the next steps in the US-China trade war. At least for now there is no indication that a de-escalation will occur anytime soon.

Last week, the trade dispute weighed more on the dollar than on the euro (and the yen). Markets saw a growing chance for Fed rate cuts if the trade tensions were to undermine US growth further down the road. Question is how long this trade might persist. EMU growth is also at risk and European markets will also be affected by the global risk-off. In this context, it isn’t that evident to see sustained euro outperformance. We expect the EUR/USD 1.11/1.14 range to hold. Intermediate resistance is coming in at 1.1265 and 1.1324. Further EUR/USD gains might become less easy from here on.

On Friday, UK Q1 growth printed strong at 0.5% Q/Q. The details were constructive, too. However, the strong growth didn’t help sterling to any sustained gains as the Brexit stalemate persists. Brexit negotiations are expected to continue today. However, the water between labour and the conservative government remains deep. Division within both parties make an agreement even less evident. For now, we don’t see a trigger for a sustained sterling comeback. At the same time, upcoming EUR/GBP resistance (0.8683/0.8723) combined with a slowdown of the EUR/USD rebound might make EUR/GBP gains less evident.

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 1.13.

The projected upper bound is: 1.13.

The projected lower bound is: 1.11.

The projected closing price is: 1.12.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 77.4830. This is not an overbought or oversold reading. The last signal was a buy 10 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 52.45. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 192 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 131.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 10 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.

Rex Takasugi – TD Profile

FOREX EUR= closed up 0.000 at 1.124. Volume was 75% below average (consolidating) and Bollinger Bands were 20% narrower than normal.

Open High Low Close Volume___
1.124 1.125 1.122 1.124 34,101

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 1.12 1.12 1.14
Volatility: 3 6 7
Volume: 104,265 125,006 137,572

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX EUR= is currently 1.4% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of EUR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on EUR= and have had this outlook for the last 14 periods.

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