Good morning traders.
The Bigger Picture
As I´ve been writing for a while now the monetary policy divergence trade seems still be be dominant force behind the USD and the eurusd but there are signs it might be weakening with the eurusd gaining in 8 out of the past 11 sessions. This could be down to the fact that technically the USDx was nearing some major highs and traders were reluctant to push higher until the trade talks between the US and China have some clarity / closure.
At the end of last week this doesn’t seem any closer so we might expect the eurusd to stay in the 11.175 to 1.1250/60 range where offers appear to be keeping a lid on it for now. To get any traction higher the eurusd needs to push this higher level and close above on a daily basis. Interestingly the recent souring of trade talks may lean on the Fed to be less hawkish (it has already been backtracking as we know) and could help push the USD lower thereby helping to push up the eurusd.
One issue that we have not mentioned for some time is the upcoming European elections. I have no indication of how the populist vote may be progressing across member states but I believe that many market participants will watch this carefully as the results could usher in some political turmoil should the federalist train get derailed in any way, shape or form.
Similarly I have not written about Brexit for some time as basically there’s not much to say that’s not been said. It continues to look like a stalemate situation in the UK with any type of deal seemingly still far off. The recent talks between the Government and the Labour opposition don’t look like coming to any type of agreement so who knows the next steps. Another referendum or ´peoples vote´as its being termed may be in the offing but I get the distinct feeling that such a move would only make matters worse.
Also Nigel Farage the original pantomime villain in all this appears to be making sound headway with his new Brexit Party. The only thing I can say with any certainty is that there is no certainty right now and we all know how markets treat uncertainty.
In summary there is nothing clear at the moment that could suggest either a strong move up or down in the eurusd – at least not to me.
The chart still looks to be heading for a test of the 97.00 level that I have mentioned recently and perhaps a dip down to the 96.77 ish level to test stops. However, the technical picture is less suggestive of a down move than it was and maybe its done with the down side for now. There is a little divergence seen on the MACD and RSI indicators but we are not as overbought as we were at the 98 levels.
As you know I´m not a big fan of indicators like this but they have their place from time to time. My issue with them is that I can’t trade them – but I suspect that’s simply my chart reading bias as many traders do seem to like indicators and use them profitably. Horses for courses!
Performance to date.
The chart below shows we are still well on track in both our model and max strategies. We did have a down week in the 1st week May but to be honest we have done well to get so far with so few down weeks. For a more detailed look at how we facilitate these strategies click here.
For this week we have very little on the data slate and noting the above my gut feel is that we will get further consolidation in the eurusd until we get a solid impetus to break higher or lower.
The 240m Chart
The levels are clear on the 4h chart. We have been capped at the 1.1250/60 level but we did make a break up out of the triangle formation. Any test lower to the 1.12/1.1210 level will be instrumental in whether we test higher or lower depending on whether it holds or not. To the up side we have a clear target at 1.13 and the downside needs to break through the 1.1176 level.
The Hour Chart
Levels as per.
I have noted S1 and R1 but I will manage them as scalps today. Therefore if levels are hit I will be looking to take some profit early should as I would rather be conservative until we get some weekly price action to work with.
Have a good week amigos.