On Friday the 22nd of March, trading on the euro closed down by 0.64% and finished the week with a 0.21% decline. On Thursday and Friday, the bulls erased all the gains they’d made during the first half of the week.
On the last day of the week, the euro came under pressure from weak German manufacturing data, which posted its lowest reading since June 2013. The euro’s decline, along with the Turkish lira’s collapse, triggered a mass retreat from risky assets.
The pound, in turn, made gains against the US dollar thanks to the drop on the EURGBP pair. Moreover, more than 5 million Britons have now signed the petition calling on the government to revoke Article 50 and cancel Brexit. The Times is writing that even May’s Cabinet is now calling on her to resign. If May does announce her departure, the pound will rise by a few hundred pips.
After the upwards movement from 1.1326 to 1.1448 was reversed, I was expecting the pair to correct to just above the 45th degree and gain a foothold above 1.1345 at least until Monday. However, the weak German manufacturing PMI weakened the bulls to the point that many of them decided to close their long positions.
This triggered a drop of 119 pips or 1.04% on the pair; roughly the distance between the LB and D3 lines. Since we didn’t get a sharp rebound from 1.1273, we can now expect either a new low or a double bottom. The current growth should be seen as a correction of the drop from 1.1448. The weekly candlestick closed with a bearish body and a long wick. As we’ve been in a downtrend since mid-February 2018 on the weekly timeframe, the bears use these candlesticks to open new short positions on the euro. To cancel this out, the bulls need to get a foothold above 1.1365 by Wednesday. The faster, the better.
In my forecast, I’m expecting an upwards correction; Monday vs Friday. 1.1338 (45th degree and LB) is providing resistance. The trend line from 1.1438 will run through 1.1345 at 15:00 EET.