EUR/USD: Sell-Side Bias Main Scenario

On the back of the dismal German PMI data, the market has adjusted EUR value in accordance. The volume profile exhibits a double distribution down on Friday, with most of the volume transacted around the 1.13 round number in what should be perceived as a sell-side continuation pattern. The endorsement of the short bias is only reinforced by the breakout of the ascending trendline, but also by the magnitude and speed of the removal of liquidity, which led to the 2nd down-leg in this ongoing hourly bearish cycle to surpass the previous downward extension on March 21. What’s more, the fact that the initial withdrawal of liquidity post German PMI was followed by another impulsive hourly bearish candle off 1.13 breaking into new lows, it translates in the round number acting as an area that sellers will be taking as a reference to extend the bearish momentum, hence the risk of shallow pullbacks. Interestingly, the German vs US 10yr bond yield spread still points to a buying bias, so at the bare minimum, it should act as a counterbalancing effect preventing major overextensions. Remember, by far, the best case is to align intermarket + technicals. Whenever there is a conflict of signals, a more cautionary approach reading price action as the ultimate truth is warranted.