The euro rallied over 1.0% against the dollar and cleared the key $1.10 following strong European data and concerns that political trouble for President Trump will delay his reform agenda.
The euro has had a bullish tone following the French election results as concerns ease over a rise of populist and anti-euro politicians. Today’s euro rally started following first quarter euro zone preliminary GDP year over year reading came in line at 1.7%. We also saw the German May ZEW current situation survey come in better than expected at 83.9, much higher than the analysts’ consensus of 82.0.
Price action on the EUR/USD daily chart shows that euro has been making higher highs and higher lows since bottoming out at the 1.0339 level. The push higher that occurred in early May has now tentatively formed a bearish butterfly pattern on May 8th. Point D was confirmed with the 70.7% Fibonacci retracement level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. The reversal however was unable to recapture the 200-day SMA. To the upside, resistance remains the psychological 1.11, followed by 1.1300. To the downside, the 1.0600 to 1.0650. zone provides major support.The trade: Buy EUR/USD at 1.1050 with a stop loss at 1.0950 and a take profit at 1.1350. The Risk/Reward Ratio is 1:3