Dollar rebounds as sellers hesitate
Friday’s weak job report seems not enough to convince traders of a Fed pause yet. Dollar’s fall against majors was supported by key near term support mentioned and rebounded strongly across the board today. Main focus of the week is still on trade balance and retails sales, as well as BoJ rate decision.
US wholesale inventories rise 0.8% in May, above consensus of 0.5%. Released earlier today, June UK PPI input dropped 0.2% mom, increased 11.0% yoy, outlook increased 0.1% mom and 3.3% yoy, basically below expectation.
EUR/USD
Daily Pivots: (S1) 1.2762; (P) 1.2812; (R1) 1.2858
As discussed earlier, EUR/USD’s rise from 1.2478 made a top at 1.2861, slightly below key near term resistance of 78.6% retracement of 1.2978 to 1.2478. Subsequent retreat brought bearish divergence in 4 hours MACD and RSI and fell to 1.2722 so far.
At this point, as long as EUR/USD stays below 1.2478 fibo resistance consolidation is expected to continue with risk of further decline to 1.2707 support (38.2% retracement of 1.2478 to 1.2861 at 1.2715) or lower. But still, we’d expect downside to be contained well above 1.2618 resistance turned support (61.8% retracement of 1.2478 to 1.2861 at 1.2624) and bring rally resumption for a test of 1.2978 high first.
In a bigger picture, the advance from 1.1825, which represent a third wave rally in a five wave structure and should have completed at 1.2971 already. Subsequent price action to 1.2694, 1.2978 and then 1.2478 represent a fourth wave correction which ended after being supported by the lower channel line and meeting 161.8% projection. Hence, the current rise from 1.2478 is likely the last advance in this five wave structure. We’d expect the up trend from 1.1639 to top at level between 1.3161 and 1.3234 and turn into consolidation before resuming. In any case, the whole view will be seriously reconsidered if 1.2618 support is violated.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui (Shing) is the founder and CEO of
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