Whilst DXY and EURUSD trade inversely, they do not have a 100% correlation. However at present they are both generating similar outlooks, which is I expect a retracement against the preceding move.
EURUSD has climbed to an 11-week high thanks to weaker German Bunds, 0% ‘growth’ from the Eurozone (which is bullish for an economy within deflation) and of course soft US data. However that was last week and we are now approaching Nonfarm data. This means we could be in for a relatively quiet start of the week and any moves are more likely to be fuelled by profit takers and technical positioning.
Friday’s close produced a Shooting Star below a confluence of resistance (38.2% retracement and prior support). This level is also ‘wave equality’ which assumes we have seen the end of an A-B-C move. This part in particular gels well with today’s DXY analysis which also suggests we have seen the end of an A-B-C pattern.
Looking further ahead we may have confirmed a Double Bottom which would project a target around 116.7. This levels also coincides with a 161.8% projection form the lows. I’ll keep this in reserve for now but I would expect buyers to enter around the 1.105 breakout lines. Momentum from the 1.052 swing low is of strong bullish momentum which favours further gains above the current 1.13 resistance.
A break back below 1.105 puts us back within bearish territory on D1 to suggest losses ahead on W1.
So for now the bias is a retracement beneath Friday’s lows before gains continue, but we shall have to see how price reacts around 1.105 for further confirmation.