Much of the market dynamics feels like December 2020. The market consensus is pretty bearish on the US dollar, along with positioning, while real interest rates and breakouts are misdiagnosed and most extrapolate to the latest topic. The broad dollar is even cheap to the current level in real interest rates. The only difference is that the global economy is in a better place. However, there are signs that the world economy may begin to cool.
This fits into our assumptions in May and June, as the peak in mobility, data surprises and expectations may necessitate a revaluation of the US dollar. It may be too early to fix the bottom of the greenback, but I think the risk / return ratio is distorting in favor of buyers rather than sellers in Q3 this year.
The current situation in the Market Profile chart of EURUSD supports this. Buy orders are positioned at the bottom of 1.2171, close to current levels, which indicates a short-term increase in the cross. Then comes the resistance from sell orders above the standard deviation, in this case expressed by the Probability Density Function of 1.22, where the volumes of sellers will be above the strength of purchases.
This means that the level of 1.2168 – 1.22 will most likely last and a new downward movement will follow, emphasizing the weak euro and the return to the strength of the dollar. A break below 1.21 (single print) will form value migration, as the first support we are looking for around 1.21 – the bottom from 05.05.2021
Trader Aleksandar Kumanov