 Hello and welcome to CMC Markets on Thursday the 25th of April and this quick look at Eurodollar where we've seen some interesting developments over the course of the past 24 hours. At the beginning of this year I think there was a widespread expectation that the dollar would continue to move higher, but that was predicated on the belief that the US Federal Reserve would continue to tighten monetary policy over the course of the rest of 2019 and that hasn't really happened. We can see a little bit of a slide in the first couple of weeks of 2019 as the Fed dialed back its hawkish rhetoric but despite that dialing back of rhetoric we've continued to see the dollar outperform against a range of different currencies and the most notable one has really been Eurodollar albeit it has been akin to watching paint dry with respect to the euro given the very low volatility in the very tight range that we've seen over the course of the past four months. Nonetheless there does appear to be some evidence that we could be looking to break out of the range that we've been in since the beginning of the year where we've seen very decent resistance on the dollar index at this 61.8% Fibonacci retracement level of the peaks that we saw back in early 2017 to the lows that we saw at the beginning of 2018 in the dollar we slowly recovered 61.8% of those losses and look as if we could well start to push higher. Now this is despite the fact that the Federal Reserve shows no inclination whatsoever that they're minded to be raising rates any time soon even though some of the US data has started to improve in the last couple of weeks and that is likely to remain I think the case over the course of the next few weeks payrolls data is likely to remain fairly resilient wages data still remains fairly strong but it's the European data that has really shown no signs of picking up throughout 2019 what we've seen is a continued deterioration there and that is really I think what has moved the euro relative to the dollar what it's done is it's driven the euro lower and I think that's really where we have to look for guidance going forward because if you look at interest rate differentials we can see that the German bond is now back in negative territory having been briefly in positive territory for most of 2018 and while US 10 year yields have come down from 3.2% they've rebounded off loads around about 2.35 to be back around back above 2.5% and at the moment I think it's a really each way bet as to whether or not the US Federal Reserve raises rates in the next 12 months or cuts them I still don't think the Federal Reserve will cut rates still will raise rates again I think the rate hiking cycle is over and really it's all about the timing of when the next rate when the next rate cut or the first rate cut comes but I think whatever happens with the Fed I think the ECB will be leading ECB will be leading the interest rates interest rate moves over the course of the next few months we've already got the announcement of a new TLTRO in September and if there's no indication of a pickup in economic activity in the euro area then I think it's quite likely we could we'll see further steps to try and ease credit conditions in the euro area we've also got the not insignificant fact that Mario Draghi is going to be replaced as ECB president by the end of this year and I think that could well dictate how the ECB moves in terms of monetary policy over the course of the next 12 to 18 months but what we've seen in the past couple of days is a significant break lower of these lows of 111.80 which is the 61.8 Fibonacci retracement level of the entire up move from 103.20 to the peaks that we saw at the beginning of February and as such it's a significant development on the charts so given the fact that we are still posting lower peaks and we are still making lower lows then the likelihood is we could well see a test of 110 initially and this series of lows through here and in this series of levels through here because if you look between 111.80 and 108 there's not really that much in the way of support between these two levels on this weekly chart here so unless we're able to recover and close back above 112.20 or break above this this trend line resistance here then the possibility is we're going to see further euro weakness and further dollar strength as we look at this daily chart over the course of the next few days and weeks so keep an eye on the dollar index around about 97.80 on a support basis and also look at the dollar and look at euro dollar and the 112 area for any signs that we could see a short squeeze back to this trend line here but certainly this development over the course of the past couple of days is significant and as such could well open up further losses for euro dollar over the course of the next few weeks and months so that's it for today this is Michael Houston talking to you from CMC market