The Euro firmed further on Monday, generating initial signal of formation of reversal pattern on daily chart.
Recovery from a higher base at 1.1660 zone extends into second straight day and cracks significant barrier at 1.1745 (top of thick daily Ichimoku cloud) with sustained break here to boost positive signal and open way for further recovery.
Recent pullback from 1.1849 (Apr 17 peak) was contained by strong supports at 1.1681/75 (Fibo 38.2% retracement of 1.1410/1.1849 rally / 200DMA), where a double bottom and bullish engulfing (Friday) has been formed.
Rising 20DMA crossed above 200DMA, to additionally support recovery, as technical picture on daily chart is predominantly bullish.
Break of cloud top and nearby 50% retracement / daily Tenkan-sen (1.1759) to expose targets at 1.1790 and 1.1806, guarding key barrier at 1.1849.
The notion is supported by the monetary policy outlook for the coming months, as economists expect the ECB to start tightening its policy as early as June and anticipate 50bps rate hike by October, while the Fed is widely expected to stay on hold in the next meeting (the last policy decision under Powell’s leadership), while new head of the US central bank is expected to be more compliant with President Trump’s demands for lower interest rates.
Broken 100DMA (1.1706) reverted to solid support which should keep the downside protected in case of failure at cloud top, though overall bias is expected to stay with bulls while the price stays above 200DMA (which protects the downside since Apr 9).
Res: 1.1759; 1.1790; 1.1806; 1.1849.
Sup: 1.1730; 1.1706; 1.1675; 1.1636.
