The euro has bounced more aggressively than gold against the dollar since the middle of last month as economic conditions and, possibly, rates in the EU and USA show more signs of converging. Eurozone-wide annual headline inflation has been 2.4% for two months running and seems likely to remain below 3% for the rest of the year barring significant surprising circumstances.
The upward movement gained significant momentum on 15 May but the price has now moved into overbought based on the slow stochastic. With a new high having been reached around $1.09, thereβs the possibility that this might be a new uptrend. However, to trade on this basis would probably mean waiting for a higher low both for confirmation of the possible uptrend and to reduce the risk associated with entering around a five-week high. Buyers would also probably look for neutral signals from Bands and the stochastic and increasing volume of buying before committing themselves.
The death cross of the 50 SMA below the 200 might be ignored given the fundamental situation and recent candlesticks, but this value area could be important if thereβs a retracement lower over the next few days. $1.10 is an obvious candidate for the next key resistance while a move back below $1.075 seems unlikely unless thereβs a major driver from news. Final eurozone-wide inflation at 9.00 GMT on 17 May is unlikely to be surprising, so the next major release for the euro is German GDP on Friday 24 May.
This article was submitted by Michael Stark, an analyst at Exness.
The opinions in this article are personal to the writer. They do not reflect those of Exness or FX Empire.
