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.