On Monday, the EUR/USD broke the resistance of a junior pattern and jumped up to the 1.1260 level before it paused the surge.
On Tuesday, a consolidation was taking place, which could be followed by a continuation of the surge of the pair.
The European Common Currency depreciated against the US Dollar, following the US ISM Manufacturing PMI data release on Monday at 14:00 GMT. The EUR/USD exchange currency rate lost 11 pips or 0.10% right after the release. The Euro continued trading at the 1.1200 level against the Greenback.
Institute for Supply Management released the US ISM Manufacturing PMI data, which came out worse-than-expected of 52.1 compared with forecast of 53.0.
According to the official release: "Manufacturing expanded in May, as the PMI registered 52.1 percent, a decrease of 0.7 percentage point from the April reading of 52.8 percent. This is the lowest reading since October 2016 when the index registered 51.7 percent. "This indicates growth in manufacturing for the 33rd consecutive month. The PMI continued a period of expansion softening which began in August 2018. Softening this month was primarily due to inputs — supplier deliveries and inventories. Three of the big six industries expanded," says Fiore."
Minor data and ECB events
On Wednesday, a minor move might be caused by the ISM Non-Manufacturing PMI at 14:00 GMT.On Thursday, all attention will be on the European Central Bank. At 11:45 GMT the Monetary Policy Statement will be published. On the release the EUR/USD has moved from 10 to 35 pips.
The event will be followed by the ECB press conference at 12:30 GMT. During the questions and answers session at the end of it the EUR is bound to make sharp moves.
At the same time the Canadian Trade Balance will be published. This event has caused moves from ten to sixty pips.
The week will end with the Canadian and US employment data being published at 12:30 GMT. This event consists of five different data sets being released.
For more details watch the Economic Calendar Overview. Moreover, feel free to ask questions for details.
EUR/USD hourly chart's review
The EUR/USD has passed the resistance of a dominant descending pattern on the hourly candle chart. This occurred in a sharp surge, which began after the rate broke short term resistance.Take into account that to properly observe the dominant pattern one needs to zoom out and load previous price info. In that way the reference points are set properly.
Meanwhile, from a fundamental perspective the surge was caused by rumours of an upcoming Federal Reserve rate cut.
In regards to the short term future, from technical theory perspective the rate could surge, if it passes the resistance of a pivot point at 1.1266.
On the other hand, after a sharp move like the one experienced on Monday, the rate should trade sideways or decline to consolidate its new price.
Hourly Chart
On the daily candle chart, the pair's sudden surge broke a dominant long term descending pattern. The move occurred because of the basic fundamentals of how the US Dollar is seen.
Namely, the Fed rate cut talk signals that there could be a larger supply of the USD. In that case its value would fall. If the market continues to think that it will become reality, the EUR/USD will go up because of the loss of value in the USD.
Moreover, this type of fundamental info always crushes technical charts.
However, take a look at the daily candle chart once more. Note that the 100-day simple moving average provided technical resistance to the currency rate and stopped the surge on Tuesday.
Daily chart
On Friday, traders were short, as 64% of open position volume on the Swiss Foreign Exchange was in short positions.
By the middle of Monday's trading session, the sentiment was 67% short. On Tuesday, 74% of open position volume was in short positions.
Note that these changes have occurred due to a combination of factors and actions of certain types of traders.
Namely, long traders have taken profits after the recent surge. Short traders turn out to be more long term oriented, as this sudden move up has not triggered stop losses. Meanwhile, some have opened short positions to take advantage of an expected retracement back down.
In addition, trader set up pending orders in the 100-pip range were bearish. Namely, 57% of all orders were to sell.
In general, the sentiment data gave mixed signals. Traders had ready pending sell orders, but the rate was already oversold. That can be explained by a domination of long term short traders, which are joined by short term sellers. Long traders are mostly out of the EUR/USD.