On Wednesday at the American session, the euro/dollar renewed its maximum and headed towards the U4. The euro rally caused another land-slide in the bond market. The yield on German bonds started to rise during Draghi’s speech. The market reacted with a rise in the yield when he mentioned inflation: the ECB has increased its forecast from 0% to 0.3%. The euro/dollar rose to 1.1284 and by the end of the day had stabilized around 1.1250.
The yield on the German 10-year bonds shot up by 25.7% to 0.893%. Since the start of the month the yield has increased by 79.6%. Due to this rise in yield, the ECB has excluded any chances of an early end to QE.
Extra impetus was given to the bulls by weak ISM results. The USA May Institute for Supply Management report was 55.7 (forecasted: 56.9, previous: 57.8).
What to expect from the euro today?
The ECB convened on Wednesday. On Thursday the Bank of England convenes. The English will let us know their interest rate decision at 14:00 EET, although no one expects a change to their monetary policy.
At 15:30 EET, the US will publish a report on the amount of initial unemployment benefit applications for the past week.
The rate may not be above the U3 for long, so I’ve forecasted the forming of a finite triangle via a recoil to 1.1230/35 with a subsequent growth to 1.1325. Now let’s have a look at the daily graph.
Due to the growth in yield on German 10-year bonds, on Wednesday the euro/dollar rebounded to the trend line built on the closing price. If the daily candle closes above 1.1310, growth will strengthen to the base trend line of 1.1350/90.
Pay attention to the stochastic which is now in a euro selling zone. An American labor force report will come out on Friday. It’s putting real pressure on all pairs. So by the evening, in anticipation of the NFP, the mood of market participants could change.
The euro/dollar renewed to 1.1284. The weekly pinbar came off. It’s now important to see how the weekly candle closes. On Friday there’s an important event planned: Nonfarm Payrolls. A return to1.1070/50 will become a signal for sales of the euro next week.