Yesterday, the euro achieved all its targets – the 1.0788 level, the resistance of the balance line, and it managed to push the Marlin oscillator into the upward trend territory. However, perhaps yesterday’s main event was the S&P 500 index hitting a new record high.
This growth occurred alongside the release of weak economic data from the US; ADP says 150,000 private-sector jobs were created in June, which is against a forecast of 163,000, industrial orders fell by 0.5% in May, and the non-manufacturing PMI (ISM) dropped from 53.8 to 48.8 in June. Even the optimistic Atlanta Fed lowered its GDP forecast for the second quarter from 1.7% to 1.5%.
Looking at the market expectations for the federal funds rate, one might assume that since the data was weak, the Federal Reserve could lower the rate in September, especially since the yield on 5-year government bonds dropped from 4.40% to 4.32% yesterday. But all these investor actions combined still look like speculative play. Now the dilemma intensifies: will the stock market continue to rise on weak employment data on Friday, or will it collapse due to a massive closure in positions?
And the second question: will the euro continue to rise against the stock market if the data remains weak? We cannot answer these questions, but we can say that historically, amid speculative uncertainty after news releases, an asset makes a strong false move worth almost a figure and then sharply reverses and moves in that direction for several days.
We haven’t seen such volatility in a long time, nor have we had similar fundamentally and technically tense situations for a while. From all of the above, we can assume that tomorrow the euro will make a false leap to the upside and then turn down to the target range of 1.0636/50 and further to 1.0595.
As for today, it’s a holiday in the US. On the 4-hour chart, the Marlin oscillator is not rising above the June 1 peak. Yesterday’s 40-pip rise with a high upper shadow shows us that speculators achieved their goals, and today we expect the euro to spend a calm day at the 1.0788 level.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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