Since CPI data, the dollar index eased slightly whereas on the Monday’s session the tradable index (DXY) bounce back and the US 10-year yields close for the day at 3.0% (below chart). The euro bulls have utilized the recent dollar weakness and resumed the short-term rally. We believe the dollar is subjected to downside risk again in the near -term.


In Monday’s European session the euro bulls were encouraged after the news of an “agreement between Italy’s populist parties 5-star Movement and far-right league close to a deal to form a new government”, reported by Telegraph. We also believe EURCHF is exposed upside risk to Italian political development rather EURUSD.

Review:
In March 2018, German production in industry was up by 1.0% from the previous month
Preview:
The week ahead it will be quiet in terms of data risk events. EA CPI is the catalyst for the major. Considering euro positioning “In the week ending 8 May, leveraged funds’ positioning turned long EUR again for the first time in two weeks” reported by Nomura in a note to the clients.

TECHNICAL OVERVIEW

As we discussed in the last two weeks we remain to our forecasted targets at “1.2000 and 1.2050 levels or even 1.2080 could possible”. The major was rejected at the 23.6 fib reaction 1.1995 (1.2555-1.1822) beyond this resistance comes between 1.2050-1.2090 with support exists at 1.1890 and 1.1820. Before rebounded to 1.1995 the major spotted with an inverse H&S pattern aimed at 1.2010, but rejected at 23.6% fib reaction (below chart). Buying the dip favors the trend and looking beyond the near -term we believe 1.2240 is an open target in the Q2.

View: Wheels leave the runway 

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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