The EURUSD surprises by a massive negative episode

Since the beginning of the week the EURUSD was dominated by a strong weakness which brought the quotation from 1.1405 to 1.1150. The massive decline can be attributed to the situation in Greece, whereof the single European currency seems to finally care about, but not in the good way, but rather in the sense of disappointment about keeping Greece in the Euro zone. However, we should also analyze the positive American macroeconomic data as: Existing Home Sales rose to 5.35 million, New Home Sales increased to 546k, Core Durable Goods Orders was published to 0.5%, but Durable Goods Orders decreased by -1.8%. Besides that, the Federal Reserve Governor Jerome Powell stated that there could be two interest rate hikes this year (September and December) if the economy evolves as expected.

Yet the Euro decided yesterday it was time to correct, even if the movement has not taken the expected magnitude. A set of PMI indicators showed the European economy in the best shape of the recent quarters (54.4 points in services, 0.7 points above the already enthusiastic estimates). Also, the data anticipate a good performance even with the EURUSD at 1.1, and also involve a more robust inflation which may limit the QE in Europe. EURUSD may now develop a corrective line up to 1.1220 – 1.1230. At this point, a breakout may encourage further growth while a rebound may easily send the price back to the old support area.

The German index DAX had an amazing ascending evolution, which sent the price in the 11600 region. The question of whether or not the trend will continue will find half of its answer on the outcome on the Greek situation, but half of the answer may come from the technical side. The session on Monday opened with a breakout, which later proved to be Breakaway gap, while the session on Tuesday also opened with a positive gap which until now seems to be defined as a Runaway gap. On a daily graph, we should consider the Shooting Star pattern which still gives a chance to the recent gap (the one we defined as a Runaway gap) to become an Exhaustion gap (situation in which the price may develop a serious correction), or the price may continue to rise and overcome the local maximum, a fact that would indicate that the ascending trend still has the resources to continue (and the recent gap is indeed defined as a Runaway one).

The American dollar appreciated against the currencies of the most important economies, thus helped USDJPY to rise above 124.00 (a scenario which may continue), USDCAD also advanced above 1.2300 (after a breakout of 1.2360 the current tendency may lead the price in a higher area) and the USDCHF managed to retest the 0.9385 resistance area, but now threatens with a serious correction of the appreciation move.