After its sharp selloff last week, EURUSD had a chance to retrace when the German Ifo business climate report came in stronger than expected. Instead of showing a decline, the index actually indicated an increase in business optimism, which pushed EURUSD up from the 1.2350 area to 1.2450.
The pair might soon resume its drop though, as the 1.2450 minor psychological level lines up with the 38.2% Fibonacci retracement level and a broken support zone. A higher pullback might take EURUSD back to the 1.2500 handle, which lines up with the 61.8% Fibonacci retracement level.
If EURUSD resumes its drop, price could head back to its former lows around 1.2350 or perhaps create new ones at the 1.2200 levels. A rally past the Fib levels, on the other hand, could indicate that an uptrend is about to take place and possibly take the pair to the 1.2700 area of interest.
Recall that the US GDP recently came in much stronger than expected, as the figure was upgraded from 3.5% to 3.9% instead of being downgraded to the projected 3.3% reading. Components of the report indicated that consumer spending led the increase, along with business investment. Export activity was downgraded, as external demand weakened.
For today, US durable goods orders data is up for release and it might show improvements as well. If so, the US dollar might be able to extend its gains against its forex trading counterparts and lead to more declines for EURUSD. After all, the Fed is expected to start tightening monetary policy next year while the ECB might have room for further easing.
There are no event risks out of the euro zone for this EURUSD trade, as only the German import prices data is due. A 0.3% decline in prices is projected, which might renew concerns of deflation in the entire region and lead to speculations of increased easing from the ECB.
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