On Tuesday’s American session the euro/dollar corrected by 50% after a growth to 1.1278. The dollar partially won back some of its losses but the situation is becoming more confusing by the day. It’s unclear whether the euro will reach the trend at around 1.15. With any European QE, the euro receives supports from the growth in yield on German bonds (bond sales).
The euro won’t allow the EUR/GBP to strengthen much since the pound is being bought across the market following the parliamentary victory for the conservatives plus strong UK manufacturing data. Despite this, with its rapid growth the pound is forcing participants to close short positions and buy euro.
Since I reckon the 1.1391 peak was hit on the 5th little wave, I don’t consider the euro growing higher than 1.1391. At the moment the euro/dollar has slid by 50% from the 1.1391-1.1131 wave (an upward correction) and 1.1131 to 1.1278 (a downward correction).
The current rate is 1.1246. I presume there’ll be a correction to the fibo level at 61.8% - 1.1294. The success of the bulls will depend on the movement of the German bonds and the euro/pound cross. At 12:30 EET the Bank of England is publishing its quarterly inflation report and Mark Carney will give a speech. If Carney disappoints buyers of the pound, the pound will drop sharply. From growth on the cross, the euro will receive support. Due to this I’m looking at an increase to the 67th degree under the U3 line.
But it’s not so simple. At 9:00 EET, Germany is publishing preliminary data on Q1 GDP values and also a definitive value for inflation in April. If the data is weak, the euro will head back to around 1.12. After this it’ll be time to look at the pound. If the pound doesn’t fall after the Bank of England’s inflation report, the euro will return to 1.1250 after a fall.
March unemployment data in the UK will be released at 11:30 EET. At 12:00 EET some preliminary GDP data for Q1 in the Eurozone will come out, and also March manufacturing output for the region. At 15:30 EET the US is publishing data on April retail sales.