The previous set up we had spoken about on EURUSD looks like it’s unraveling a little with the US dollar pushing higher across the board. We had been looking at the daily inverse head and shoulders move that had been a key set up for a push back towards the 1.2000 levels, especially as fundamentals pointed to safe haven dollar buying easing off.
The shoulder line of our H&S formation is now breaking lower with what looks like a short-term hold at 1.1510, before a move lower towards further support at 1.1300. As normal we would like to see confirmation of the move lower, but a close below 1.1510 would be enough for us to call a test lower.
Fundamentals are an important driver here that we must pay attention to as trade war escalation has the potential to give the dollar a further leg up at any point. However, the inverse is obviously true as well. The trade deal with Canada had got many a little too excited that the US was ready to do deals with every trade partner, but of course, the reality is that the likelihood of more tariffs on China is still high.
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With the Fed content to frame rising US treasury yields as an echo of economic optimism, bond markets take a breather while oil prices have blown off course