EUR/USD: Lands At Key Weekly Support After Week-Long Selling

2019年2月12日

The consistency and conviction in buying the US Dollar across the board has been unlike anything seen since 2016, as gains extend for an 8th consecutive day. The latest sell-off gunning through daily horizontal support (100% proj target as well) has now landed at a strong weekly support area (red line). The printing of the POC at this precise level strengthens the notion that strong clusters of bids sit on this area as one would expect. Looking at the behaviour of price, it looks as though the economic miseries in Europe vs a relatively stable outlook in the US have been playing a greater role as depicted ever since the change of slope in the 25-HMA of the magenta line (German 10-yr bond yield), which has been tracking the price of EUR/USD very tightly.

Despite landing in a weekly area of support, the lack of any rebound off 1.1275 is very worrisome, even if the divergence against the German vs US yield spread is huge. However, one needs to find evidence via price action and not just blindly enter trades because a major divergence with a highly correlated asset exist as the market may be paying attention to a different narrative. Technicals have proven to be king to capitalize on this rally but one feels, such an elongated run is at a significant mature state, especially at such a huge weekly horizontal support + yield spread divergence + slope of German 10y yield is starting to pick up pace to the upside, suggesting that a case for a bounce can be made.