Previous:
On Tuesday the 27th of August, trading on the EURUSD pair closed up. Volatility was high across all of yesterday’s trading sessions. In Asia, the bears tried to reverse the upwards trend, but ran out of steam after a couple of hours. The pair then recovered from 1.1663 to 1.1700. The euro then rose further to 1.1734 on the back of a broadly weaker dollar and rising crosses.
A breakthrough in NAFTA trade negotiations between the US and Mexico increased demand for risky assets, and given that the EURUSD pair is in an uptrend on the hourly timeframe, along with rising crosses, the bulls destroyed everything in their path.
The euro’s rise was halted by the release of US data along with a rise in US10Y bond yields. The dollar was given a boost after a strong US consumer confidence report. The index for August came out at 133.4 (forecast: 126.7, previous reading revised from 127.4 to 127.9). This triggered a correction on the euro to 1.1691, after which it started trading sideways within a narrow range.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart.
Current situation:
The demand for risky assets and the euro on the crosses overwhelmed the bearish divergences and the double top. My prediction of a rebound from the upper boundary of the daily channel did not come to pass. It’s good that I decided to reduce my risk level by half (to 0.5%) on my counter-trend trade.
I’ve highlighted 2 areas on today’s chart, which show similar patterns of a correction followed by growth. So long as sellers don’t manage to break through the low at 1.1633 (from the 27th of August), buyers have the potential to bring the rate back up to 1.1734.
