The EUR/USD has erased the morning gains and now is trading in the red, could drop much deeper if the dollar index will have enough directional energy to climb higher again on the short term. Price has increased in the morning and has climbed above the 1.1262 yesterday’s high, the bulls look a little exhausted on the short term, a minor drop is natural after the impressive rally.
The pair maintains a bullish perspective, despite the minor drop, is still located above a major dynamic support (resistance has turned into support), the current drop could be ended with a retest of the mentioned support level before will increase again.
Will be very important to see what will happen on the USDX in the upcoming days, the index has found strong support and now is fighting hard to bounce back, remains to see if will have enough energy to start a larger rebound or we’ll have only a minor bounce back. The index is under selling pressure as long as is trading below the 97.58 static resistance (support has turned into resistance).
The pair has decreased even if the Euro-zone data have come in mixed, has received support from the German Ifo Business Climate, which has increased from 113.0 to 114.6 points in May, exceeding the 113.1 estimate, the German Flash Manufacturing PMI surged from 58.2 to 59.4 points in the current month, exceeding the 58.0 estimate. Moreover the French Flash Services PMI increased from 56.7 points to 58.0, beating the 56.8 forecast, the Euro-zone Flash Manufacturing PMI has resumed the uptrend, was reported at 57.0 points, higher versus the 56.5 estimate and versus the 56.7 in the previous reading period.
The Euro has taken a hit from the Euro-zone Flash Services PMI, the economic indicator has decreased from 56.4 points to 56.2 points in May, despite that the traders have expected to see an increase to 56.5 points, has signalled that the expansion has slowed down, the German Flash Services dropped from 55.4 to 55.2 points in May, even if the economists have estimated an increase to 55.5 points. Moreover the French Flash Manufacturing PMI has disappointed as well, has dropped from 55.1 to 54.0 points, while the estimate was 55.2 points.
The USD has increased on the mixed US data, the New Home Sales have disappointed because have dropped from 642K to 569K in April, much below the 611K estimate, while the Flash Manufacturing PMI dropped from 52.8 points to 52.5 points, even if the specialists have predicted an increase to 53.2 points. The dollar has received support only from the Flash Services PMI, which was reported at 54.0 points, higher versus the 53.3 estimate and versus the 53.1 in the previous reading period.

EURUUSdaily

You can see that the rate has found strong resistance much below the fourth warning line (WL4) of the former major descending pitchfork and now could come down to retest the lower median line (lml) of the ascending pitchfork before will try to increase further on the short term. A retest of the lower median line (lml) will bring us a good buying opportunity on the short term, the first upside target will be at the fourth warning line (wl4) of the descending pitchfork, the major targets will be at the median line (ml) and higher at the upper median line (uml). A selling opportunity will appear only if the rate will slip below the lower median line (lml) and if will come back to retest this line.

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