Risk appetite on Monday was widespread: the S&P 500 rose by 0.41%, oil by 1.71%, gold by 2.37%, the dollar index dropped by 0.63%, and the yield on 5-year US government bonds increased from 3.96% to 4.00%. This collective movement pushed the euro above the target level of 1.1420, opening the way to the next target at 1.1535. We expect this level to be broken and further growth toward 1.1692. We will prepare for a correction if a reversal pattern forms around 1.1692.
Today started with a slight decline due to worsening Australian data: gross company profits in Q1 fell by 0.5% against expectations of a 1.4% increase, and the current account balance worsened from -12.5 billion dollars to -14.7 billion. However, inflation data for the eurozone for May will be released later today, with a forecast of 2.0% y/y (CPI) versus 2.2% y/y in April.
This, combined with the already heated market anticipating a rate cut, will only increase pressure on the euro. Meanwhile, US factory orders for April are forecast to fall by 3.1%. Adding to this the sharp deterioration in US-China relations early in the week (with Trump suddenly threatening secondary sanctions on Huawei) and the stalled negotiations with Europe, the euro’s position could improve. The key here is not to miss the moment when investor resolve breaks and the anti-risk paradigm shifts (making the US dollar a safe haven again).
On the four-hour chart, the price has consolidated above the 1.1420 level. Growth is developing above both indicator lines, and the Marlin oscillator is rising in positive territory.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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