EUR/USD Enters Consolidation Around The 1.2200 Level

The USD is showing some strength today, mostly due to dovish statements from the ECB. With only a few hours left in the forex trading week, today’s key movers have been the EUR/USD (-0.43%), USD/CHF (+0.15%), USD/JPY (+0.21%), and GBP/USD (-0.24%).

My colleague Skerdian Meta covered remarks from ECB president Christine Lagarde made during the American overnight session. If you missed it, check it out here. This event has been a short-term market driver for eurozone currencies and prompted weakness versus the USD. Aside from Lagarde’s comments, there were a few U.S. metrics out today that have swayed valuations:

• Existing Home Sales (MoM, April) fell by 2.7%, vastly underperforming expectations (+2.0%). This is an interesting downtick but is indicative of the ongoing housing supply shortage.
• Preliminary figures from the Manufacturing PMI (May) came in stronger than expected at 61.5%. This number beat projections (60.2) and the previous release (60.5).

In addition to these two reports, the Baker Hughes Rig count came in at 356, up 12 rigs week-over-week. This gain brings the total U.S. rig count (oil and gas) to 455, up from 448 one week ago.

All in all, it’s been a slow economic news day in the U.S. for the EUR/USD. The action has been choppy, with rates trading both sides of 1.2200.

EUR/USD Enters Rotation Near 1.2200

The past four days have brought heavy two-way action in the EUR/USD. Rates are now below 1.2200 but holding within the daily compression pattern.

Overview: If you toggle the dynamic chart above to a daily candlestick setting, you’ll see the four-day channel that surrounds 1.2200. This is a textbook consolidation pattern and indicates market indecision. While nothing is guaranteed, the EUR/USD is due to breakout in the coming days. Stay tuned to FX Leaders for details on how to trade the action should the opportunity arise.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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