It’s been hard going for the euro dollar throughout June, as the pair continued to grind their way higher and off the lows of 1.3520 mid month, with yesterday’s price action finally delivering some much needed momentum, courtesy of the US dollar. The length of the consolidation phase has surprised even me, following the strong buying signal which appeared on the 5th June, with extreme volume on a wide spread up candle and deep lower wick – indicative of support by the big operators. The pair duly found support in the 1.3520 area and since then have climbed higher finally breaching the area of price resistance in the 1.3660 to 1.3680 level as shown on the daily chart.
However, the volume associated with yesterday’s wide spread up candle, whilst an increase on the previous day, is still only average, and given the price congestion now immediately ahead, the pair may struggle to build on the current bullish momentum. With the solid level of price support now in place, this should provide the requisite platform for a sustained move higher and provided daily volumes increase, then this will help to propel a move beyond the 1.3750 region in due course, with the euro shorts squeezed once again.
The current sentiment for the pair is being driven more by US dollar weakness than euro strength, with the dollar index breaking below a key support level in yesterday’s trading session and now looking to move deeper towards the 79.50 area where further support awaits. In early trading ahead of the US open, the index has traded in a narrow range at 79.84 ahead of the ISM manufacturing data which is forecast at 55.6, a modest increase on last month’s 55.4, and if achieved may help to give the US dollar some support in the short term. However, as always NFP takes centre stage this week on Thursday in a holiday shortened week.
By Anna Coulling