EUR/USD: Bullish Outside Day At Critical Support

The pair has seen a vigorous rebound off a major liquidity area sub 1.13, which represents a weekly horizontal level as depicted by the red horizontal line. The formation of a bullish outside day is a strong testament that the order flow has suddenly shifted into a more convincing buy on dips mentality. I must say it’s been very hard to read the intraday correlations in the EUR/USD, as the price has been for most of February in total disconnect with its historically reliable German-US 5-yr yield spread, to instead follow much more tightly the German 10-yr bond yield performance. Under this premise, the improvement in the German yield over the last 2 days as the risk-on picks up, alongside the existing macro divergence in the yield spread vs the US, were factors posing a major challenge to see further follow through beyond critical levels of liquidity sub 1.13. The impulsiveness of the rebound alongside the magnitude (move worth larger than daily ATR) has resulted in the break of a descending trendline, finally aligning correlations and price.