ZuluTrade Blog

A potential Setup for EURUSD

Market View | Thursday, July 25, 2019 1:32 PM GMT

As we are heading towards today’s monetary meeting of the ECB, a potentially rewarding bullish scenario would be to take advantage of the possibility that Mario Draghi will not be as dovish as markets are expecting him to be.

The pair is currently at a formed downtrend that could potentially end ones it tests the 1.618 Fibonacci level.

EURUSD Daily Chart

The bullish scenario should be considered busted if the pair reaches the 1.1000 level.

Strengths of EURUSD:

  • There is no sign of inflation expectations de-anchoring, or a probability of deflation or recession.
  • tariffs on autos have been postponed. Nevertheless, the trade relation between the USA and the EU is the next hot issue for 2H19. The French tax on tech giants increases this tension.
  • Greek economy may soon get rid of the capital controls imposed since the summer of 2015. Yet, the rating of Greek debt is having a stable outlook, which means that no upgrade is expected for the next 12~18 months.
  • improving macro readings: GDP, unemployment, M3, private loans(stable), trade balance, German GDP, German Trade balance, German factory orders, wage growth, European industrial production, service PMI


Weaknesses of EURUSD:

  • Spain could head towards new elections if today’s confidence vote fails to support a government.
  • the Italian drama could produce breaking news once again. Nevertheless, the Italian yields are falling like the rest of the EU government bond yields.
  • negative yields are back to stay.
  • deteriorating macro readings: inflation(stable), retail sales, current account, PPI, German Manufacturing PMI, EU Manufacturing PMI,  economic sentiment, German economic sentiment,investor confidence.



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