These days the exchange rate has become very volatile to the upside with a very aggressive force, many traders were surprised by this, we broke the March highs!
These breakdowns in h4 and Daily made the market accelerate. Going by the data on the positioning of retail traders, over 70 percent remain short, which makes me think that the targets there at the top depicted in the chart at 1.1787 are not at all impossible.
I would stay flat if I had no positions on eur/usd and wait for a trading range/congestion condition to form so as to trade the levels in the ellipse area.
The motivation for this rise is, in my opinion, due to a Profit-taking on the dollar and a shift in liquidity by investors (see highs in gold and silver) and we see a major correlation change in the markets with the weak dollar and stock markets that have been reflating over the last week.
As for the pound, we have fallen further behind not having broken the March highs in the 1.3175 area (red arrow), but it is trying hard to break the June highs, breaking out of the exhausting trading range of these months.
I expect a realignment on the highs with eur/usd, the level to be broken is 1.2820 which could start the movement towards 1.3175 and also bring down eur/gbp which remains very high as there is more strength of eur/usd.
We remain waiting for liquidity exchanges between assets to position themselves for the upcoming August movements, which I expect will be important (liquidity will decrease and volatility should rise).
Happy Sunday to all.
Marco Iacoviello – OG