EURUSD is consolidating inside a symmetrical triangle pattern ahead of the top-tier events from both the euro zone and the US this week. For today, German and French manufacturing and services PMIs are lined up and these might provide volatility for the pair.
Price is on its way to test the top of the formation around the 1.2450 minor psychological resistance, and an upside break might lead to as much as 150 pips in gains, which is the same height as the chart pattern. Similarly, a downside break from the 1.2400 handle or the bottom of the triangle could lead to as much as 150 pips in losses.
Stochastic is on middle ground and is on its way up, hinting that euro bulls have enough energy to push for a test of the triangle resistance and a potential breakout, depending on the results of the PMI reports. Small improvements are expected from both countries, which might be enough to lift the region’s manufacturing and services PMI readings as well.
However, disappointing data could lead to another test of support and a potential breakdown. US building permits and housing starts data are due today and strong figures could lead to more demand for the dollar, setting the tone for a potentially upbeat FOMC statement tomorrow.
Continued consolidation is also possible, paving the way for quick scalp trades from the triangle top and bottom until the FOMC statement takes place. Hawkish remarks from the Fed could lead to more dollar gains while cautious comments could force the Greenback to retreat.
Other event risks today include the release of the German ZEW sentiment index, which could show an improvement from 11.5 to 19.8. Euro zone trade balance is also due today, along with the US current account balance.
By Kate Curtis from Trader’s Way