Previous:

On Monday the 1^st of October, trading on the euro closed down. The rate rose to 1.1625 during the European session before dropping to 1.1564 in the US. I found the market’s behaviour confusing yesterday given that the euro dropped against the dollar on the back of positive news concerning Brexit, a rise in oil prices, and a drop in US10Y bond yields.

Brent oil rose to 85.30 USD per barrel, which provided support to commodity currencies. The USDCAD currency pair dropped to 1.2782. The loonie rose as the euro took a dive. Moreover, this all happened against the backdrop of a decline in US10Y bond yields.

Aside from oil, the loonie was also propped up by Canada agreeing to a new three-way free trade deal called the USMCA (US-Mexico-Canada Agreement).

September’s ISM manufacturing PMI disappointed markets. The report came out lower than the previous value, and lower than the forecasted value. The release of this PMI data stopped the US dollar’s rise in its tracks, but now it’s back on the attack.

Day’s news (GMT+3):

• 11:30 UK: PMI construction (Sep).
• 12:00 Eurozone: PPI (Aug).
• 19:45 US: Fed’s Powell speech.

Fig 1. EURUSD hourly chart.

Current situation:

During Monday’s European session, the euro rose to 1.1625, missing out on my target of 1.1650. It then dropped from the LB balance line to 1.1563. I had predicted a recovery for the euro to 1.1618, but the bears scuppered this, pushing the rate down to 1.1547.

The pair has exited the channel. I’m not considering a decline today given that the hourly cycles and patterns show the euro strengthening. Add to this my confusion over the euro’s decline yesterday and I can say that for me, the market situation is ambiguous.

If we take a look at the daily timeframe, the 1.1525 low from the 10^th of September catches the eye, as this has the potential to stop the euro’s decline against the greenback. If the bears break through the 1.1525 – 1.1535 zone, then we’ll see a further decline to 1.1470.