The theme “sell in May” has been surfacing in the financial markets for decades. Based on this, we dive into the available historical data for our subject currency and the US dollar as well. Everyone’s got an opinion when it comes to trading or investing in the financial markets. The following outcomes are subject to the available historical MT4 data.
Here are our findings:
USDX:
So far this year, the dollar index ticked higher for the 1st 3-months in a row and lowered in April. The same pattern was recorded in 2001 and 2015. During the first four months, Gold and Bitcoin exercised a negative correlation to the US dollar along with our subject currency EUR.
Historically, 13 times the dollar index has outperformed in May with an average of 0.60%.
Besides, the Swiss Franc, Japanese Yen, and Swedish Krona end up positively correlated with the dollar in the G10 FX block.
Which EUR cross has seen the bright spot in May?
As shown in the below table, the common currency fell against the dollar fifteen times out of 26. During the same period, the EUR performed well against the Yen sixteen times. Looking historically over two decades, EURJPY has inclined to return an average closer to 2% over May.
Coming to the current date, London was out for May day, but the EUR closed marginally higher against the dollar on Monday. Overnight, EUR strength was not by its own merits, due to dollar back foot G10 currencies and Gold was lifted. Besides, PMIs in the EU grab the attention.
PMIs:
In the EZ, April manufacturing PMI registered another stellar performance led by strong new orders across six main European countries.
“Eurozone manufacturing PMI hits fresh survey record high in April” IHS Markit cited.
As per the official release, EZ manufacturing PMI improved to 62.9, up from 62.5 in March and its highest ever recorded level. It was also the tenth successive month that the index has posted above the 50.0 no-change marks.
Data review:
Looking ahead, we will get PMIs (Wed), Retail sales (Thu), and German Industrial production (Fri). The other side of the Atlantic offers big-ticket US economic data lie ADP employment data, ISM services PMI and the week rests with the NFP employment data. Overall, this week’s EUR movement will cast on the dollar.
TECHNICAL OVERVIEW
EURUSD rallied the 1st trading day in May, but the daily indicators are remaining bearish. For the past four months, 200EA on the monthly chart capping the price. Earlier in 2018, the same moving average capped the price and led to a drastic fall.
Ahead of the key PMI releases and big US data, we are going to trade between 1.2000-1.2200 (rounded). So far, EUR manages to hold its 20MA (Weekly) and 100MA (Daily).
For the past two months, the price action continues to trade within 1.1700-1.2150 levels; hence, ahead this week, the 1.2250-1.2150 level will remain a crucial resistance zone to watch.
Suppose the price is moving higher, the next higher levels to be watched around 1.2150 and 1.2250. On the flip side, 1.1990 and 1.1940 should offer decent support. Below here, 1.1830 exists.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
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