The EUR/USD pair continues to try to rally above the neckline of an inverse head and shoulders that I see on the daily charts, which is roughly centered and the 1.1720 level. The pattern is somewhat complex, so I’m not quite ready to throw a lot of money at it, but certainly at this point it looks like we are going to contain the market within a “buy on the dips” type of scenario. I think the US dollar starting to get punished for the trade war, but at the end of the day why something happened is much less important than the fact that it did.
It looks as if the 1.1650 level is finding plenty of bids, while the 1.1720 level has plenty of offers. If we do break down below the support level, then I anticipate that the buyers will show back up near the 1.1625 handle, and then of course the 1.16 level. Further complicating the scenario is that the market has also been consolidating overall between 1.15 and 1.18 for some time. Because of this, expect a lot of volatility but I do think that the buyers are eventually going to get their way. Of course, anything can happen and of course a headline could across the wires involving European banks again, but until then I think this pair will tried to rally.