A story of EUR strength and USD weakness.

The EUR/USD had rallied testing almost the 2010 spike lows near the 1.1870 level. Overnight and yesterday we came very close to 1.1850, which you could argue is a successful test.

Despite the weak ISM manufacturing data, the US Dollar is doing a little better today. This may be partially due to how oversold the USD is, and the sentiment has reached very extreme (bearish) levels and may be due for a corrective bounce.

Technically, the EUR/USD has made a major breakout of a multi-year range, and this move just above the range highs may have been enough to stop out shorts. If this is the case, the EUR/USD could easily slip back into the range if US data improves the rest of the week, especially with NFPs on Friday.

One other thing to keep in mind: We are in the summer doldrums, and the market is known for false breaks this time of year.

Originally, this idea was posted HERE in the “Week Ahead” video.

Blake Morrow