EURUSD may be in for another set of losses, as the pair formed a reversal chart pattern on its 1-hour time frame. A double top formation can be seen, with price nearing the neckline around the 1.2600 major psychological support.
Stochastic is indicating oversold conditions though, which suggests that a EURUSD bounce might take place. MACD is on middle ground, barely providing any clear clues for now. A bounce off the 1.2600 handle could lead to the formation of another top at the 1.2800 resistance zone.
On the other hand, a strong downside break would confirm that a selloff until the previous lows at 1.2500 might be in the cards. Take note though that the chart pattern is roughly 200 pips in height, which means that the resulting breakdown could be off the same size. In this case, EURUSD might find its way down to the 1.2400 mark and make new lows.
EURUSD Trade Forecasts
Earlier this week, the euro zone had another set of bleak economic data, mostly from Germany. The ZEW economic index fell to the negative territory, reflecting how outlook has dramatically worsened for the region’s largest economy.
However, the latest FOMC minutes led to weaker demand for the dollar, as the Fed officials didn’t express eagerness to hike rates next year. Despite that, the US is on a fundamentally stronger footing compared to the euro zone, making the path of least resistance to the downside for EURUSD.
Event risks for EURUSD movements today include a couple of speeches by Governor Draghi and the US retail sales release. The headline figure might show a 0.1% decline, which might lead to dollar weakness but an upside surprise is likely, given how the latest employment report printed stronger than expected results. As for the ECB head, dovish remarks are expected and any commitment to ease further could be negative for the euro.
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