Forex Diva has been eyeing euro–dollar (EUR/USD) during the past week as it dropped and lost volatility. Yesterday the pair finally saw buying demand on the back of an encouraging Italian bond sale. Also, better than expected US economic results on Thursday led to overall gains for equities which buoyed riskier currencies. So far, the EUR/USD continues to see momentum as it trades in the 1.29 area, erasing nearly all the losses of last week.
Looking ahead, a quiet day is expected with the only notable economic releases being Canadian GDP and US PCE figures which will be out later today. Nonetheless, with next week having a full slate of key releases starting with Chinese, US and UK Manufacturing data on Monday, UK & ECB Interest Rate Meetings on Thursday, and the US’s Non Farm Payrolls on Friday, we could see trading become volatile if forex traders begin to position themselves ahead of next week’s action
candles of EUR/USD have been trading above the Ichimoku cloud, supported by the Kijun line where a bullish engulfing candlestick pattern was formed yesterday and confirmed today by the current bullish candle. Now the EUR/USD must figure out if this is an ideal opportunity to take profits on short positions, or the correction will be short lived. If the prices reach and hold in the 1.31 area, we could be expecting a formation of a double top, which will reverse the general uptrend and would be the beginning of a downtrend.
According to the Speculative Sentiment Indicator (SSI), nearly 60% of traders are short the EUR/USD today, 3% higher than the short positions of yesterday. This could be a weak bullish signal with the contrarian indicator.