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The euro staged a rally against the US dollar last as risk-on sentiment return after the FOMC minutes, which caused traders to sell the US dollar, which paused the recent unstoppable rally in the buck.
Wall Street started to advance higher after minutes from the Federal Reserve’s May 3-4 policy meeting showed that policymakers unanimously agree that the U.S. economy is holding strong, and that they are optimistic about reining in inflation without triggering a recession.
The minutes revealed that the Fed members agreed upon successive half a percentage increase in interest rate in June and July. The decision did not surprise traders; on the contrary, it eliminated fears of a 75-basis point hike, which could have triggered another sell-off in stocks.
Given the big sell-off in the US dollar we could see some price consolidation before the next major move takes place in the EURUSD. However, scope does exist for more upside.
Given that the EURUSD pair is above the pivotal 1.0500 area, it is probably that we could see more upside advancement in the euro towards the 1.0800 or even the 1.1000 level.
Something that is still worrying me equally or even more bullish right now is that traders are not bearish towards the EURUSD at all. Sentiment is rising while the EURUSD pair looks higher.
The ActivTrader Market Sentiment tool shows that some 57 percent of traders are bullish towards the EURUSD. This is encouraging for more price gains this week and may even in June.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has been trending sharply higher since the 1.0350 level and has fully invalidated a reasonable sized bearish head and shoulders pattern.
Interestingly, a large, inverted head and shoulders pattern will form if the pair reaches the 1.0900 level. If we see a reversal back under the 1.0500 level then expect the 1.3000 support level broken this week, watch out for a further crash.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things only look bad for the EURUSD pair has broken convincingly under the 2020 swing low, just or slightly above the 1.0500 level.
If the EURUSD pair continues to sink and moves under the 1.0500 area this week, then watch for an attack towards the 1.0200 region or even below parity and the 0.9800 level.
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