11.06.201911:09 Forex Analysis & Reviews: EUR / USD: bulls conquered the 13th figure, but then everything depends on the dollar

The upward impulse for the euro-dollar pair is gradually fading away: the disappointing Nonfarm helped the eur / usd bulls rise to the area of the 13th figure. However, further growth is questionable. After Washington and Mexico were able to avoid a tariff war, the degree of geopolitical tension somewhat declined, and this fact allowed the dollar to take a breath and slow its decline across the entire market. The dollar index was around 96.74 points, and the yield on 10-year-old treasuries rose to 2.155%, moving away from levels of multi-year lows.

In other words, the weakness of the US currency allowed buyers of the eur / usd pair to occupy a price level of 1.1240-1.1330, within which it stayed for almost the entire spring. Now, the main task of the bulls is to keep the price high and consolidate their positions, getting close to the 14th figure. It should be immediately noted that this is not an easy task, given the rumors about the ECB's intentions to lower the interest rate further into the negative area.

However, the rumors are controversial. So, insider sources of the American news agency recently reported that the European Central Bank with a 100 percent guarantee would lower the interest rate if the eurozone economy does not show signs of growth in the second half of the year. Allegedly, most members of the regulator are ready to take this step, and in the foreseeable future - at one of the autumn meetings. But the European press is not so pessimistic: according to their information, the ECB members are only concerned about the slowdown in inflation. But, at the same time, they have not discussed the issue of mitigating the parameters of monetary policy.

In general, the market "did not believe" the rumors about the ECB rate cut. The rhetoric of Mario Draghi in the last meeting, which took place last week, was quite neutral, and in some places even optimistic, so the rumors about the regulator's dovish intentions are not consistent with his words. In turn, Draghi is not among those officials who are willing to make decisions contrary to his words, for example, as the head of the Central Bank of Japan Kuroda in 2016. Most likely, some members of the ECB really do not exclude the implementation of this scenario (which they shared with journalists), but it is too early to talk about the general intentions of the Central Bank. By the way, the European Central Bank at the June meeting even raised its forecast for inflation this year, expecting an increase in key inflation indicators by the end of the third quarter.

The skepticism of traders regarding market-related rumors about the ECB allowed the euro to remain at the bottom of the 13th figure. However, the pair's bulls are now struggling to get every point they've won, because the dollar has stopped its decline, and the single currency does not have its own strength to develop the northern trend. After all, in addition to the ECB, there is also Italy. In respect of which, the European Commission is preparing to begin a disciplinary procedure. This fact also puts the background pressure on the euro, although the rhetoric of Italian politicians has softened somewhat lately, especially after the completion of elections to the European Parliament.

Loud and populist slogans were replaced by quiet and constructive counter proposals. At the very least, recent reports from Rome indicate that the Italian Cabinet of Ministers wants to prevent the use of disciplinary measures by the EU. Italian Prime Minister Giuseppe Conte and the heads of the ruling parties have already made a statement - according to them, this issue is now at the stage of discussing the package of budget proposals. According to preliminary information, the government of the country excludes the option of reducing the deficit and raising taxes. The Cabinet of Ministers plans to avoid disciplinary measures at the expense of reverse actions, reducing the tax burden, thereby stimulating economic growth.

Whether Brussels agrees on such an action algorithm is an open question, so the "Italian problem" is still relevant for the European currency, due to its unresolved status. As to what happened last year, it can be assumed that the relevant negotiations between Rome and Brussels will take more than one week (but not one month). On the other hand, the Italian side is clearly striving for compromise, so it will be easy to predict the outcome of the negotiating epic, despite the fact that Italian populists are in power.

Thus, the fundamental background for the pair is not negative, but further price growth completely depends on the behavior of the dollar. If the US inflation indicators show negative dynamics, the pair will continue corrective growth, but otherwise the bears will quickly return eur / usd to the base of the 12th figure.

In terms of technology, the couple is ready to conquer new heights. The location of the price on the upper line of the Bollinger Bands indicator (on D1 timeframe) and being above the Kumo cloud and all the lines of the Ichimoku Kinko Hyo indicator indicate that the bullish momentum is still in force. To talk about pricing goals, let's move to a higher timeframe. On the weekly chart, we see that the price tends to the bottom line of the Kumo cloud (coinciding with the upper line of the Bollinger Bands indicator) - this level corresponds to the mark of 1.1430. If the fundamental factors continue to play on the side of the bulls, we will soon witness the testing of this resistance level.